May natural gas is expected to open 2 cents lower Thursday morning at $3.25 as the market looks ahead to the first storage build of the season and traders are split on near-term market direction. Overnight oil markets were mixed.
Overnight weather data turned warmer. "Forecast changes were in the warmer direction [Thursday] in this period and focused in the Central U.S.," said MDA Weather Services in its morning six- to 10-day forecast. "This region is now expected to see aboves returning with greater intensity in the latter half, out ahead of the next round of low pressure out of the Rockies at that time.
"The East Coast, likewise, favors above normal temperatures in this period, with the warmest conditions a result of westerly flow ahead of low pressure early on. At that time, temperatures peaking into the upper 70s are expected as far north as New York City. The passage of low pressure will return normal readings to the East for the second half.”
AccuWeather.com forecasts that today’s high of 56 in New York City will reach the mid-70s by the weekend before easing back to 62 by next Thursday, 2 degrees above normal. Chicago's high today of 46 is expected to rise to the mid-60s by the weekend before settling back to 57 next Thursday, the seasonal norm.
Traders see the market as somewhat stretched to the upside. "I'm thinking the market is kind of overbought," said a California trader. He said that he wouldn't be a seller until the relative strength indicator (RSI) currently at 64, reached 75 to 80. "If it gets to $3.50, I'm all over it."
Market technicians, on the other hand, see more or less clear sailing higher. "Is this the end of the rally? Could there be some sideways to lower price action? It's possible, but at the same time there is not a lot of evidence to point to an immediate turn lower," said Brian LaRose, a market technician with United ICAP in an evening webcast.
"The only thing the bears have going for them is the daily candlestick picture. There is a little divergence on the intraday charts, but each and every opportunity the bears have had to break this market down, they have failed miserably."
Buyers and sellers will likely be all over the market when the Energy Information Administration (EIA) releases weekly inventory figures at 10:30 a.m. EDT. Estimates are coming in and are expected to show the first storage build of the season. Last year, 6 Bcf was injected and the five-year average is for a 13 Bcf withdrawal.
Wells Fargo Securities LLC is looking for an injection of 13 Bcf, and a Reuters survey of 22 traders and analysts showed an average 7 Bcf increase with a range of -14 Bcf to +15 Bcf.
Industry consultant Bentek Energy, utilizing its flow model, calculates an 8 Bcf increase and cited the tail end of the cold that caused last week's above average withdrawal of 43 Bcf "gave way to significantly warmer temperatures in the major heating demand regions of the Midcon Market and Northeast, averaging 7.3 degrees Fahrenheit and 10.3 degrees F warmer than the previous week's averages, respectively."
In overnight Globex trading May crude oil rose 28 cents to $51.43/bbl and May RBOB gasoline fell fractionally to $1.7148/gal.