September natural gas is expected to open a penny higher Thursday morning at $2.67 as traders factor in ongoing warm temperatures and expected lean storage figures from a government report. Overnight oil markets rose.
Traders Thursday will have an idea of just how much recent widespread heat has affected supplies with the 10:30 a.m. EDT release of inventory statistics from the Energy Information Administration (EIA). Current thinking is that the build will be less than 30 Bcf, and perhaps the lowest July build since 2010.
Last year 52 Bcf was injected, and the five-year pace for this point in the injection cycle is also for a 52 Bcf increase. Analysts at IAF Advisors in Houston see a 22 Bcf increase, Raymond James sees a 30 Bcf injection. A Reuters survey of 18 traders and analysts revealed a 26 Bcf average with a range from 22 to 33 Bcf.
Tim Evans of Citi Futures Perspective calculates a 24 Bcf gain and said, "[E]stimates we've seen so far suggest a consensus running in the vicinity of 30 Bcf in net injections. This would be a modest decline from the 34 Bcf refill in the prior week and a supportive contrast with the 52 Bcf five-year average gain."
Evans' suggests this sets the market up for a bullish surprise. His figures show that by Aug. 12, the year-on-five-year storage surplus could fall from its present 559 Bcf to 428 Bcf. Evans is currently standing aside the market looking for a low-risk trade entry.
Tom Saal, vice president at FCStone Latin America LLC, in his work with Market Profile has identified trading targets based on certain levels of price action. The first trading objective is for the market to test Wednesday's value area at $2.713 to $2.679, but beyond that Saal identifies the initial balance at $2.713 to $2.679. The week's storage report often provides a catalyst for prices to break out of the initial balance and reach trading targets both higher and lower. An upward breakout from the initial balance would look for an objective of $2.767 and a downward break has an objective of $2.584.
In overnight Globex trading September crude oil rose 2 cents to $41.94/bbl and September RBOB gasoline gained a penny to $1.3215/gal.