September natural gas is expected to open 3 cents higher Wednesday morning at $2.73 as overnight six- to 10-day weather models turned slightly warmer. Overnight oil markets fell.
Analysts see Thursday's inventory report coalescing around 60 Bcf, a touch above the 53 Bcf five-year average. "Although the weather map will still include some warmer than normal temperatures, there won't be enough power sector demand to offset the year-on-year growth in natural gas supply, at least according to out model," said Tim Evans of Citi Futures Perspective in closing comments to clients.
Evans is estimating a 65 Bcf build in Thursday's report and sees the current 81 Bcf year-on-five-year surplus growing to 121 Bcf by Sept. 4.
"A rising surplus confirms the market is becoming better supplied on a seasonally adjusted basis, with a corresponding downward fundamental pressure on prices. With prices conservatively valued already at the bottom of their five-year range for this time of year, we think the downside for natural gas may remain limited, but the growing storage surplus may also push back the calendar on the recovery back above the $3.00 mark we have been looking for."
In the physical market, a sudden drop in receipts into westbound REX Zone 3 had analysts scratching their heads Tuesday. Industry consultant Genscape reported "Rice Energy deliveries to REX in Monroe County, OH, dropped to zero, causing REX [east to west] flows to fall by about 190 MMcf/d."
Late Tuesday, Rice Energy told NGI that it is installing permanent facilities at its Rex interconnect, so it will be diverting production to other interstate lines for a day or two. They commissioned that just last quarter.
"Rockies Express Pipeline (REX) receipts at the 'Rice/REX Gunslinger Monroe' point fell to zero on the 18th and are at just 8 MMcf/d in [Wednesday's] preliminary cycle. The drop comes after volumes had averaged 190 MMcf/d in the 30-days prior to the 18th," Genscape said.
The National Hurricane Center in its 5 a.m. EDT report said TS Danny was showing winds of 50 mph as it headed west at 14 mph. The storm was about 1,445 miles east of the Lesser Antilles and NHC projections showed it headed to Puerto Rico.
In overnight Globex trading September crude oil fell 27 cents to $42.35/bbl and September RBOB gasoline shed 3 cents to $1.6194/gal.