December natural gas is expected to open 3 cents higher Thursday morning at $2.33 as traders anticipate government storage figures to show an increase less than historical averages and near-term warmth appears largely baked into the market. Overnight oil markets fell.
As the industry enters the final lap of the injection season, a possible bullish divergence may be setting up. Record storage was recorded in October 2012 at 3,929 Bcf, and prices reached a relative low of $1.902 in April of that year. By all accounts, inventories are poised to exceed the 3,929 Bcf record and possibly reach an unprecedented 4 Tcf by the time the last molecule is packed away.
So far prices have "only" traded as low as $1.948 (Tuesday) with record supplies expected going forward. During 2012 prices advanced, with spot futures reaching $3.93 by November 2012, a more than $2 advance.
Supplies currently stand at 3,814 Bcf and were it not for some heating demand in the East, estimates on Thursday's injection report could have been considerably higher. Last year 88 Bcf was injected, and the five-year average stands at 73 Bcf. For the week ended Oct. 23, IAF Advisors is calculating a 67 Bcf build and Ritterbusch and Associates is penciling in a 76 Bcf injection. A Reuters survey of 21 traders and analysts revealed a sample mean of 69 Bcf with a range of 62-85 Bcf.
Bentek Energy also calculates a 69 Bcf build using its flow model, and the decline from last week's 81 Bcf is thought to be largely a function of increased heating load "Residential/commercial heating demand drove the largest gains week-over-week, increasing by an average 4 Bcf/d to 19.9 Bcf/d for the week. The large increase in residential/commercial demand was driven by the doubling of heating degree days within the Northeast compared to the previous week, and almost as strong gains in Midcontinent market HDDs."
Forecasters are calling for only a slight decrease in heating requirements in their near-term outlooks. WSI Corp. in its Thursday six- to 10-day outlook said the "period forecast continues to call for highly anomalous warmth over the eastern two-thirds and below average temps over the West. [Thursday's] forecast is similar to yesterday aside from localized daily differences. GWHDDs are down 0.3 to 47.6 for the CONUS. Forecast confidence is above average. Medium-range models are in good agreement and have been consistent with the amplified -PNA [Pacific North American] driven pattern. However, there are the typical technical and timing differences late in the period as the pattern begins to relax.
"There is a slight downside risk across the majority of the interior West, Front Range and even the northern Plains. The southern U.S. might run even warmer."
In overnight Globex trading December crude oil fell 51 cents to $45.43/bbl and December RBOB gasoline shed a penny to $1.3266/gal.