December natural gas is set to open 4 cents lower Thursday morning at $4.15 as traders see the market within a consolidation range. Market watchers were also given an extra day to hone inventory estimates. Overnight oil markets continued to sink.
Overnight weather forecasts turned in a mixed performance with some parts of the country colder and others not as much. WSI Corp. in its morning six- to 10-day outlook said "[Thursday's] 6-10 day period forecast is colder than previous forecasts across the southern US, but elsewhere it's not quite as cold due in part to the day shift.
"Forecast confidence is considered near average based on good medium range model agreement with the reinforcing arctic shot during the front half of the period. As usual, there are technical differences late in the period. There is a slight risk to the colder side across the Midwest, Northeast and much of the eastern US. The interior West into the south-central states, mainly late in the period."
The weekly EIA storage report has been delayed a day due to observance of the Veteran's Day Holiday, but analysts are suggesting inventories will continue to increase. Industry consultant Bentek Energy utilizing its flow model calculates a 38 Bcf build, "nearly double the announced injection from the same week last year of 22 Bcf and is close to triple the 5-year average of a 16-Bcf build. Total demand increased by 5.8 Bcf/d from the previous week to average 64.1 Bcf/d while production remained flat, averaging 70.6 Bcf/d during the week.
According to Bentek's analysis fundamental data clashed with their observed injection data. "Fundamentals are supporting a relatively strong build this week in the upper 40s. However, Bentek’s sample of injection activity implies a slightly smaller build but still above the last year and 5-year averages. Injection activity within the Producing Region declined by 5 Bcf compared to the week prior according to Bentek's sample of fields. Continued strong injections in the Producing are being offset by the East Region, where several fields noted their first weekly net withdraws of the season. The East noted only a 0.5 Bcf injection, but it represents a large decline from the previous week's 18.8-Bcf injection implied from Bentek's sample."
Noting Wednesday's weak performance Drew Wozniak, vice president of Market Research and Development at ICAP Energy LLC said "We are in a congestion band of $4.12 to $4.25 but the market feels heavy. Then next band below this is $3.99 to $4.07. The reason I am saying this is if Natty can get below the $4.12 level, there could be a rapid sell-off. Conversely, the upside is less consistent but there is a band of consolidation from $4.36 to $4.46.
"After the rundown from [Tuesday's] post-close Bull blip, we entered very choppy waters. Volume is still low with high chop as the algos [algorithmic traders] battle it out and the human force is not participating – it’s the signature. I am Bear for the moment, as any lift has been weak and short lived."
In overnight Globex trading December crude oil continued its march lower dropping 88 cents to $76.30/bbl and December RBOB gasoline fell 3 cents to $2.0475/gallon.