February natural gas is set to open a penny lower Thursday morning at $3.29 as traders grapple with a wide range of estimates for a key government inventory report and weather forecasts turn slightly cooler. Overnight oil markets gained.
Weather models overnight turned ever so slightly cooler. "Over the past 24 hours, the models have weakened next week's big warmth, and that is driving the majority of the small demand gains this morning," said Matt Rogers, president of Commodity Weather Group in a Thursday morning report to clients.
"Slightly colder changes are noted for the Midwest, East and South (even the West at times). Otherwise, the models still show the pattern transition toward a colder direction for the 11-15 day, but the jet stream configuration really struggles to stabilize. The areas most likely to see colder than normal temperatures by late six-10 day into the 11-15 day are again the West and South. The Midwest only manages to get back toward a normal range at times, with the East Coast slowly transitioning to normal and then slightly below by late period."
Flip-flopping weather has analysts burning the midnight oil trying to figure out the week's Energy Information Administration (EIA) storage withdrawal report. The range on the estimates is huge, thus setting the market up for some primo volatility once the number is released at 10:30 a.m. EST.
According to a Reuters survey of 20 traders, the report could show anywhere from -147 Bcf to -253 Bcf. The Reuters average is -231. Last year 175 Bcf was withdrawn and the five-year pace stands at -170 Bcf,
Jim Ritterbusch of Ritterbusch and Associates calculates a 191 Bcf pull. Tim Evans of Citi Futures Perspective calculates a withdrawal of 216 Bcf. Industry consultant Bentek Energy, utilizing its flow model, is looking for draw of 245 Bcf.
This week's milder temperatures will likely translate to thin draws in the weeks ahead. Bentek has run the numbers utilizing its supply-demand model and said, "While the deficit relative to five-year average levels will undoubtedly grow this week, [Wednesday's] ‘Supply & Demand Daily’ forecasts for the next two storage weeks show withdrawals well below the five-year average withdrawals of 176 Bcf and 166 Bcf at 115 Bcf and 69 Bcf, respectively, suggesting the deficit relative to five-year average levels may flip back to a surplus of roughly the same magnitude with the release of the next two storage reports, barring any changes to the current weather forecasts."
Earlier in the week the National Weather Service (NWS) forecast warmer conditions leading to reduced heating requirements in major energy markets. For the week ending Jan. 21, NWS predicts that New England will see 214 heating degree days (HDD), or 70 fewer than normal. The Mid-Atlantic will experience 186 HDD, or 78 fewer than its seasonal norm; and the greater Midwest from Ohio to Wisconsin is expected to have 186 HDD, or 111 fewer than its normal tally.
In overnight Globex trading February crude oil added 49 cents to $51.57/bbl and February RBOB gasoline rose fractionally to $1.5502/gal.