August natural gas is set to open flat Thursday morning at $2.90 before release of a government storage report that is expected to continue the trend of storage builds greater than long-term averages. Overnight oil markets rose.
Overnight weather models turned slightly warmer. According to Commodity Weather Group's Thursday morning report, increased energy demand is likely due to "warmer to hotter weather next week ahead of a cold front that the models are struggling to define. We saw that issue on the models last week, too, and they eventually firmed it up over the weekend leading into this week. As a result of this struggle, we lowered confidence a bit on the overall six-10 day, but it still looks like the East Coast could see a spike of stronger warming around the middle of next week (Wednesday-Thursday) with possible middle 90s for the Middle Atlantic.
"Otherwise, the outlook is slightly warmer Midwest to South for the six-10 day and trending hotter for California later next week. The 11-15 day shows very similar themes to yesterday, but it is slightly warmer on the East Coast (near normal). The outlook is still not as cool as the American ensemble for the Midwest, but the Western heat ridge upstream offers that risk of cooler results in the East," said Matt Rogers, president of the firm.
Increased heat and higher expected cooling loads this week may be just the recipe to bring storage builds to within long-term averages.
The National Weather Service forecasts that for the week ended July 25, major population centers will experience greater than normal cooling requirements. New England is expected to toast under 70 cooling degree days (CDD), or 25 more than normal, and New York, New Jersey and Pennsylvania should see 75 CDDs, or 16 more than normal. The greater Midwest from Ohio to Wisconsin is forecast to swelter under 74 CDD, which is 16 more than normal.
At present, storage builds are still above long-term averages, and market bulls will be watching the 10:30 a.m. EDT release by the Energy Information Administration (EIA) for signs the rapid rebuild is showing any signs of slowing down.
The five-year average stands at 53 Bcf, and one year ago a stout 92 Bcf was added. For the week ended July 17, IAF Advisors of Houston calculates that 67 Bcf was added, and ICAP Energy is looking for an increase of 78 Bcf. A Reuters poll of 25 traders and analysts revealed an average of 70 Bcf with a range of 64 Bcf to 79 Bcf.
In overnight Globex trading September crude oil gained 16 cents to $49.35/bbl and September RBOB gasoline added a penny to $1.8343/gal.