April natural gas is expected to open a penny lower Thursday morning at $1.78 as traders juggle a changing weather outlook with indications that storage is filling fast. Overnight oil markets fell.
Weather models Thursday fluctuated, with near-term moderation giving way to cooling. Commodity Weather Group in its Thursday morning report said, "It has been a trend nearly this entire week to see the six-10 day edge warmer and then see a stronger cooler to colder pattern loom in the 11-15 day. [Thursday's] changes were slightly warmer again for the Midwest to South inside the six-10 day, while slightly cooler in the West. The incoming cooler to colder surge for the Midcontinent is finally reaching days nine-10 and should dominate the six-10 day by Sunday's update; however, with its current half-steps forward, we may continue to see same-day demand losses as it progresses forward.
"The cool to cold push appears impressive in the early 11-15 day for the Midwest and then East -- even on the European guidance -- but then we see more evidence of undercutting Pacific flow that should aim to warm the pattern as we head toward the second week of April," said Matt Rogers, president of the firm.
Thursday's Energy Information Administration (EIA) storage report is expected to show the first build of the season. Inventories currently stand at 2,478 Bcf and are running nearly 1 Bcf ahead of last year's pace. With estimates swirling around a 20 Bcf build, that surplus is likely to continue to grow.
Ritterbusch and Associates estimates a 14 Bcf build, and ICAP Energy calculates a 20 Bcf increase. A Reuters poll of 22 traders and analysts revealed a 20 Bcf average with a range from +5 Bcf to + 32 Bcf. Last year, 4 Bcf was withdrawn, and the five-year pace stands at a 24 Bcf decline.
All indications are that Texas facilities won't be seeing much in the way of injections for a while. According to industry consultant Genscape, data is indicating that Texas' "combined inventory currently stands at approximately 695 Bcf, the highest March inventory in history. Texas inventory for March 2016 will come in close to 46 Bcf higher than in March 2012. At each of the seven facilities monitored, activity has either stagnated or transitioned to steady injections over the past few weeks.
"The summer months will likely prove to be relatively lethargic as overall injections should amount to less than half of those seen last year."
In overnight Globex trading May crude oil fell 78 cents to $39.01/bbl and May RBOB gasoline fell a penny to $1.4707/gal.