October natural gas futures are expected to open 2 cents lower Thursday morning at $2.87 as traders balance a government report expected to show the largest inventory increase in nearly 2 months, with tropical storms expected to lessen Southeast demand. Overnight oil markets retreated.
Thursday's expected storage build report is anticipated to be far greater than last week's lean 11 Bcf build report, but supplies currently stand at 3,350 Bcf, and with 11 weeks remaining in the traditional injection season, an estimated 55 Bcf would have to be injected weekly for inventories to reach last year's record 3,954 Bcf.
This week's estimates are swirling around a 40 Bcf build, far greater than last week’s report but well short of last year's 88 Bcf increase and a five-year pace of 67 Bcf.
Ritterbusch and Associates calculates a 30 Bcf increase, and industry consultant Bentek Energy, utilizing its flow model, comes up with a 44 Bcf build. A Reuters survey of 18 traders and analysts revealed a 41 Bcf average with a range of 30 to 48 Bcf. It would be the largest build since July 8 when 64 Bcf was injected.
October futures are bumping up close to $3, but will that bumping continue for much longer? "[G]iven the storage overhang and robust production figures, will prices stay bullish?" said John Sodergreen, editor of The Desk's weekly Tealeaves report. "We tend to think so. Despite strong production, exports are pretty firm, too. Maybe too firm. This week folks are talking again about sub-4 Tcf for an end-of-season high point.
"We think it will be higher certainly than the five-year average and last year, to be completely frank. For that matter, we figure it will breach the 4 Tcf mark, too."
Tropical Depression 8, at one time poised to hit the North Carolina coast, has moved out to sea. At 5 a.m. EDT Thursday the National Hurricane Center (NHC) reported it was 405 miles east-northeast of Cape Hatteras, NC.
Load-killing Tropical Storm Hermine was upgraded from Tropical Depression Nine on Wednesday afternoon and was 235 miles west-southwest of Tampa, FL. It was up to 65 mph and was headed north-northeast at 12 mph, but forecasters expected it to begin moving farther to the northeast on Thursday.
Hermine's center was expected to approach the northwest Florida coast on Thursday afternoon, NHC said. By Friday morning the storm was forecast to be centered over southern Georgia, likely to skirt the Atlantic Coast into early next week.
Personnel had also been evacuated from one of the 11 rigs currently operating in the Gulf of Mexico (GOM) -- unchanged from Tuesday -- and five DP rigs have been moved off location out of the storm's path, the same as on Tuesday, BSEE said.
On Wednesday, 360 MMcf/d was shut in. The agency estimated that 19.52% of the current oil production in the GOM was shut in (down from 22.06% on Tuesday), and 10.59% of natural gas production (up slightly from 10.18% 24 hours earlier).
NHC was also monitoring a disturbance 700 miles west of the Cabo Verde Islands but gave it a 0% chance of tropical storm formation in the succeeding 48 hours.
In overnight Globex trading October crude oil fell 33 cents to $44.37/bbl and October RBOB gasoline shed a penny to $1.3187/gal.