January natural gas is expected to open 6 cents higher Thursday morning at $3.76 as traders fine-tune their expectations for the market impact of the expected Christmas cold and await government storage figures that are anticipated to erase the year-on-year storage deficit. Overnight oil markets gained.
According to forecasters, the Christmas cold is still on, but there are difficulties trying to figure out exactly what happens prior to its arrival. In a Thursday morning report, Commodity Weather Group President Matt Rogers said, "Changes in storm systems and cold front timing continue to hound the boundary between the current warm pattern and the incoming colder one. The models continue to fluctuate, but the general theme over the past few days has been to amplify the warming ahead of the big cold switch, and today is not an exception, for the East Coast and South especially.
"Warmer changes right around the Christmas holiday still pose some lower demand risks. Meanwhile, the new cold pattern is pouring into the Plains starting middle six-10 day now and reaching the Chicago area by days eight-10. The various ensembles continue to be in excellent agreement on building and then holding the new Alaskan ridge pattern through the end of the period. They vary on cold-supporting cast members like the Greenland and gate-keeping ridging, but they all agree on cold troughing focused around the Midwest to East."
Alaskan ridging probably won't be on the minds of traders when the Energy Information Administration (EIA) releases inventory data for the week ended Dec. 12. The anticipated reduction in the year-on-year deficit of about 196 Bcf should be enough to wipe out the current year-on-year shortfall of 186 Bcf. Last year, a polar vortex-driven 256 Bcf was withdrawn, and the five-year pace is for a 157 Bcf pull. Currently, estimates are coming in around 60 Bcf.
ICAP Energy expects a withdrawal of 63 Bcf, and IAF Advisors is looking for a pull of 61 Bcf. A Reuters poll of 24 traders and analysts showed a 60 Bcf average with a range of 52-78 Bcf. Bentek Energy calculates a 60 Bcf reduction using its flow model and said that with the week's expected thin pull, both the East and West consuming regions will have more gas in storage than a year ago. "Imports from Canada helped offset the increased power demand while production continued to rise and averaged above 72.6 Bcf/d during the week, marking the first time Lower 48 dry gas production has averaged above 72 Bcf/d in Bentek's history.
"The offsetting fundamentals were only slightly reflected in Bentek's sample of storage activity as withdrawal activity fell at many fields within the East and West Regions and increased within Bentek's sample of fields within the Producing Region. Bentek's sample of salt-domes continued to post net-injections on the week; however, the sample builds were offset by withdrawal activity within the non-salts."
In overnight Globex trading January crude oil climbed 92 cents to $57.39/bbl and January RBOB gasoline added 3 cents to $1.6116/gal.