August natural gas is seen opening 3 cents higher Friday morning as traders mull options strategies to cope with a rangebound market. Overnight oil markets rose.

Analysts don’t see a lot of trading potential in the market at present. Thursday’s smaller than expected EIA storage report might have represented a correction to the holiday-driven storage report of the week before.

“[A] continued narrowing in the supply surplus to the tune of about 27 Bcf was furthered with an additional 20-25 Bcf contraction likely in next week’s EIA report,” said Jim Ritterbusch of Ritterbusch and Associates in a Friday morning report to clients. “We will reiterate that this dynamic of a narrowing in the surplus will remain price-supportive going forward into next month. But at the same time, we are recognizing that this narrowing in the supply overhang has slowed appreciably during the past month or so in providing an upside price limiter.

“In other words, much focus has shifted back to a very high absolute level of storage that has contributed to this week’s price decline to approximate five-week lows. Furthermore, non-weather-related price drivers continue to provide a mixed bag as production recovery and utility switching toward the lower-priced coal appear to be losing momentum. At the end of the day, this remains a market in which a case for a major price move of much more than 20 cents in either direction is still elusive. Since we still see nearby pricing likely unchanged some three to four weeks down the road, option writing strategies still represent a good strategy, in our view.”

According to forecasters, conditions over the NYISO footprint for the weekend will likely keep gas buyers for power generation busy. Warm, humid conditions will need to be balanced with an inventory of renewables. “Hot and stormy conditions are likely, [and] hot and humid conditions are expected [Friday] with max temps in the mid 80s to mid 90s,” said WSI Corp. in its Friday morning report. “A frontal system and this air-mass will likely trigger heavy downpours and thunderstorms, which may be locally severe. A secondary cold front will support the chance for additional isolated pop up showers and thunderstorms during Saturday, which will finally give way to fair weather by Sunday.

“It will become less humid but remain warm with high temps in the 80s to mid 90s. Another frontal system will support a risk for scattered showers and thunderstorms early next week. Near to slightly higher than average Great Lakes water levels will continue to support hydro generation, [and] recent and expected rain will be highly beneficial as it will likely cause streamflow rates to hold fairly steady. A west-southwest to west-northwest breeze will boost wind generation during the next couple of days.”

In overnight Globex trading September crude oil rose 16 cents to $44.91/bbl and September RBOB gasoline gained a penny to $1.3729/gal.