June natural gas is set to open 2 cents lower Thursday morning at $4.72 as traders hone their short-term trading algorithms ahead of a government storage report expected to show an increase about inline with the five-year average. Overnight oil markets were lower.
Expectations for the 10:30 a.m. EDT release of storage data by the Energy Information Administration (EIA) are for an injection in the low 70 Bcf range with little in the way of surprises expected. That type of figure is only going to be good enough to reach the five-year average of 72 Bcf in spite of all the highly touted new production coming out of the shale basins. Last year 81 Bcf was stored.
Houston-based IAF Advisors calculates an increase of 71 Bcf and industry consultant Bentek Energy utilizing its flow model sees a 66 Bcf build. A Reuters survey of 24 traders and analysts resulted in an average 71 Bcf addition with a range of 61 Bcf to 79 Bcf.
Bentek noted that "Demand increased from the previous week by 1.1 Bcf/d, which was largely centered in the Producing Region from an increase in power burn demand. Bentek estimates that power burn demand rose 1.2 Bcf/d within the region. The increased demand was reflected in Bentek’s sample of deliveries to power plants, which rose to their highest levels since the Feb. 13 storage week and averaged 6.9 Bcf/d during the week."
Analysts aren't looking for any surprises even though last week's reported 82 Bcf build caught many analysts about 6 Bcf short. "This week's report is looking very much like the advertised sample of low 70's," says John Sodergreen, editor of Energy Metro Desk (EMD). "Nothing we saw this week points to a surprise, but, then again, so far this year, those weeks which don't produce a surprise report (5 Bcf +- than the EIA report) are now the exception. Nonetheless, 70-75 Bcf should be right on the money this week; last week's true up should suffice for the time being... Next week we may possibly see out first three-digit build - not soon enough as far as we're concerned." The EMD survey came in at 72 Bcf.
Market technicians see natural gas holding somewhat tenuous support for a possible run higher. "Minor ABC correction off the $4.852 high?" queried Brian LaRose, analyst at United ICAP in closing comments to clients. "The A=C objectives should be able to provide support if this is the case. .618 [of] a=c at 4.703 was tested (and held) Wednesday. a=c is down at $4.626. So [we] still peg $4.626-4.625-4.611 as key support. As long as Natgas remains above this zone, a test of the $5.089 area will be possible. Take out support expect a drop to $4.458, potentially even $4.214."
In overnight Globex trading June crude oil eased 53 cents to $100.24/bbl and June RBOB gasoline fell fractionally to $2.9150/gallon.