February natural gas is expected to open 4 cents lower Thursday morning at $2.83 as traders mull government storage figures that are expected to show only a modest storage withdrawal in the face of stout cold experienced by most of the country last week. Overnight oil markets rose.
Natgasweather.com said intense cold will persist for the next few days before a warm surge is expected. "Extremely cold temperatures will continue over the Midwest and Northeast, where lows of single digits to 15F below [zero] are expected the next few nights. Temperature anomalies 20-35F colder than normal will persist through Saturday before the Arctic grip eases into early next week. It will still be relatively chilly over the northern U.S., but anomalies will return to being within 10F of normal. We still expect milder conditions to surge out of the southern U.S. and into the Midwest and Northeast through Wednesday as Arctic air retreats into Canada.
"However, there will be a fast-moving Canadian weather system and associated cold blast moving into the north-central and eastern U.S. late next week with at least a few regions experiencing a quick blast of colder temperatures."
Thursday's Energy Information Administration storage report is expected to show the heaviest withdrawals since November, but increased production and the holiday are expected to keep the storage pull at less than historical averages. Last year, 148 Bcf was withdrawn from storage, and the five-year average is a 145 Bcf pull. IAF Advisors, however, is looking for a 120 Bcf decline, and Wells Fargo analysts calculate a 132 Bcf withdrawal. A Reuters survey of 21 traders and analysts revealed an average 121 Bcf reduction with a pull ranging 110 to 133 Bcf.
Bentek Energy's flow model sees a 123 Bcf draw. The firm said demand was about the same as the Nov. 21 storage week when the EIA announced a 162 Bcf withdrawal. "However, the holiday week combined with strong production growth since that week will lessen the reliance on storage significantly. The weak withdrawals within the Producing Region add some risk to forecast for a weaker withdrawal for the region," Bentek said.
"However, with the brunt of the cold occurring in the Midcontinent region, where there is a poor sample, withdrawals were likely significantly stronger than the past several weeks."
In overnight Globex trading February crude oil gained 30 cents to $48.95/bbl and February RBOB gasoline added a penny to $1.3486/gal.