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Storage Builds Seen at Five-Year Average; October Called Unchanged

October natural gas is set to open unchanged Thursday morning at $2.66 as traders brace for not only the 10:30 a.m. EDT release of storage data but also any tangential effects of the 2:00 p.m. EDT announcement by the Federal Reserve on interest rates. Overnight oil markets fell.

Weather models changed little overnight. Commodity Weather Group in its Thursday morning six- to 10-day outlook predicts a broad pattern of above-normal temperatures throughout the plains states from North Dakota as far south as Texas.

In store are "another day of mixed changes overall, with some slightly warmer Midwest adjustments for next week, a hotter California this weekend, then cooler Western changes next week with the inclusion of potentially more tropical moisture there. The Deep South is also very slightly cooler overall, while the East Coast sees some warmer mid-week changes and then cooler late-week shifts. The net result is a very close to flat demand change from yesterday," the forecaster said.

"The 0z cycle of all models gained minor demand as cooling degree days increased and early-season heating degree days remained about flat. There are still major splits between the models from the near-normal American side to the moderate to even much above at times European guidance. 11-15 day chaos levels on the European ensemble edge slightly higher again overnight, with mixed pattern views for the end of the forecast period," said Matt Rogers, president of the firm.

The 10:30 a.m. EDT release of storage data by the Energy Information Administration may give insight into the question of just how strong production is and if hints that gas production has peaked are valid. A big wild card is the Labor Day holiday and its impact on demand. All indications are that the industry is on path to equal if not exceed the record 3,929 Bcf inventory established in 2012, and some analysts have suggested that 4,000 Bcf is in sight. The Energy Information Administration predicts a 3,840 Bcf total by the end of the injection season.

Supplies currently tally 3,261 Bcf, and for the week ended Sept. 11 estimates are swirling around the five-year norm of 75 Bcf. IAF Advisors calculates an increase of 73 Bcf, and Bentek Energy's flow model figures on a 71 Bcf, but the firm admits some high-side risk. A Reuters poll of 24 traders and analysts resulted in a 73 Bcf mean with a range of 66 Bcf to 78 Bcf. Last year 90 Bcf was injected.

Natgasweather.com predicts a build of 74 Bcf and said, "It was warmer than normal over much of the country, especially the northern U.S., while also relatively hot over the southern U.S. where plenty of 90s to locally 100s were observed, including over much of Texas, and even briefly into major California cities. This led to hotter temperatures week over week compared to last week's plus-68 Bcf build, although the long Labor Day weekend is expected to have led to lighter demand overall," the company said in a Thursday morning report.

In overnight Globex trading October crude oil fell 37 cents to $46.78/bbl and October RBOB gasoline lost a penny to $1.3751/gal.

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