October natural gas is expected to open unchanged Thursday morning at $2.89 as traders anticipate that government storage figures will be sharply higher than last week and close to historical averages. Overnight oil markets rose.
Figures show that storage builds will have to equal the five-year average if storage is to match last year's record-setting 3,954 Bcf. With eight weeks to go on the traditional injection season, 65 Bcf will be necessary to bring current stocks of 3,437 up to that level. This week's estimates of the storage build are a step in that direction.
Last year, 74 Bcf was injected, and the five-year pace is a 68 Bcf addition. IAF Advisors calculates a 62 Bcf gain, and ICAP Energy is looking for a 65 Bcf injection. A Reuters survey of 19 traders and analysts showed an average 63 Bcf with a range of 45 to 72 Bcf. Industry consultant Bentek Energy calculates a 66 Bcf increase and said the biggest change from the previous week occurred in the South Central Region.
"The largest change in storage activity, week-over-week, is expected to be announced in the EIA's South Central region, where a larger than expected withdrawal of 9 Bcf was announced for the previous week compared to an estimated 10 Bcf injection this week," it said in a report. "Compared to the previous week when salt dome sample activity totaled a small net withdrawal, this week salt dome sample activity totaled a net injection of 4.3 Bcf, with larger injections or smaller withdrawals at all but two fields in Bentek's salt dome sample."
Tim Evans of Citi Futures Perspective is looking for a 48 Bcf storage build. "A 62 Bcf build for last week would come within 7 Bcf of the five-year average, the smallest variance of the past 18 weeks. Again, it’s not that we doubt that it’s possible, but this would be a significant shift toward a weaker supply-demand balance, and one that has not exactly been anticipated by the price action to date."
In some cases the volatility triggered by Thursday Energy Information Administration (EIA) storage reports can be enough to reach trading targets of followers of Market Profile. Tom Saal, vice president at FCStone Latin America, said to look for the market to test Wednesday's value area at $2.912 to $2.862. Beyond that, a breakout from the Initial Balance higher at $2.940 or lower at $2.860 would set up trading targets of $2.980 for a move higher or $2.820 for a move lower.
Saal said the market is showing a neutral weak pattern, a pattern of trader indecision.
In overnight Globex trading October crude oil added 42 cents to $44.00/bbl and October RBOB gasoline rose 2 cents to $1.3512/gal.