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'Overbought' October Contract Seen A Penny Higher

October natural gas is expected to open a penny higher Thursday morning at $3.07 as season-ending supplies equal to last year seem to be slipping away. Overnight oil markets rose.

The traditional storage injection season is rapidly drawing to a close, and indications are that it will be stretch to reach last year's record build of 3,954 Bcf. Supplies currently stand at 3,499 and with six weeks left until the end of October, more than 75 Bcf would have to be injected weekly. If this week's estimates are correct, reaching last year's inventory levels will become even more elusive.

Last year a whopping 96 Bcf was injected, and the five-year pace is an 83 Bcf build. Analysts at ICAP Energy calculate a 46 Bcf build, and industry consultant Bentek Energy, utilizing both its flow model and supply-demand model, estimate a 48 Bcf increase. A Reuters poll of 21 traders and analysts revealed an average 52 Bcf with a range of 44 to 71 Bcf.

Weather forecasters are looking for a somewhat bullish number. "[Thursday's] EIA weekly natgas storage report is expected to bring a build in supplies of +50 -52 Bcf by market survey averages, well under the five-year average of +83 Bcf," said Natgasweather.com in a Thursday morning report. "It was warmer than normal east of the Plains, while cooler than normal over the West and portions of the central U.S. We're expecting a build of +49 Bcf, ultimately falling to the slightly bullish side of estimates.

"No significant changes in the latest overnight weather data as it maintains a warm overall pattern through early October but still with minor intrusions of cooler more fall-like conditions over the west-central U.S. and Northeast."

Traders see the market stretched to the upside. "I think we are very overbought [and] $3.10-3.12 should be the next stop and then lower," Alan Harry, director of trading at McNamara Options in New York, told NGI.

In overnight Globex trading November crude oil added 98 cents to $46.32/bbl and November RBOB gained a penny to $1.3778/gal.

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