July natural gas is expected to open a penny higher Thursday morning at $4.67 as traders hone their short-term trading algorithms and prepare for a government storage report that is expected to continue the trend of triple-digit inventory builds. Overnight oil markets were mixed.
Traders will be taking a close look at Thursday's storage report for signs of just what impact recent elevated temperatures have had on the rate of storage builds. Last year, 92 Bcf was injected, and the five-year average is for 87 Bcf. Credit Suisse is expecting an increase of 109 Bcf, and Bentek Energy calculates a 110 Bcf injection. A Reuters poll of 22 traders and analysts revealed an estimated 110 Bcf average with a range of 101 Bcf to 115 Bcf.
Others are a little higher. "[E]stimates we've seen so far suggest expectations are centering somewhere in the 107-110 Bcf range, a bit below our model's 112 Bcf forecast but still bearish compared to the 87 Bcf five-year average for the week ended June 13," said Tim Evans of Citi Futures Perspective."
Bentek sees a large component of the robust build as being due to lower demand. "Demand decreased by 8 Bcf from the previous week, driven largely by a drop in power burn, which declined by an average of 1.2 Bcf/d for a total of 8.8 Bcf through the week," the firm said in a report. "Total supply noted a decline of 3 Bcf, driven by a decline of 3 Bcf in Canadian imports and 1 Bcf from production. Of the decrease in the power sector, a majority of the dip occurred in the Producing Region, where sample injections at facilities such as Pine Prairie have remained strong."
Eastern storage facilities continue to sock it away. "Further robust builds throughout the East Region have continued to prop up the daily storage range's midpoint in the triple digits. A lack of demand in the Northeast has allowed regional fields to post strong injections over the past week. Week-over-week, [and]...builds in the East Region are 3.0 Bcf higher, led by facilities such as ANR, Dominion and NGPL," Bentek said.
That decrease in demand will most likely not be in play for next week's storage report. The National Weather Service (NWS) predicts elevated levels of cooling requirements in key population centers. For the week ended June 21, NWS forecasts that New England will see 49 cooling degree days (CDD), well ahead of normal by 33. The Mid-Atlantic is anticipated to endure 62 CDD, or 32 more than normal, and the Midwest from Ohio to Wisconsin is likely to experience 76 CDD, or 39 more than its normal seasonal tally.
WeatherBELL Analytics in its Thursday morning 20-day forecast sees a sequence of oscillations between warmth and cooling. Joe Bastardi in reviewing the JMA (Japan Meteorological Association) model said, "JMA through mid-July is not looking like its monthly, though a trough reforms near the East Coast for Weeks three and four. It's a two-week segment, so it may be heading back toward its monthly idea.
"Summer El Nino response [was] not there on the CFSv2 [National Weather Service Climate Forecast System] [and] ENSO 3.4 cooling may be leading to decreased model skill." Transient weather patterns may be in the making. Bastardi said week one is represented by cooling, but he calls warming in week two "over the top". Week three is expected to begin a new cooling phase. "Pattern still wet, with transience still across the U.S.," he said.
In overnight Globex trading July crude oil fell 3 cents to $105.94/bbl and July RBOB gasoline continued its recent gains adding a penny to $3.1115/gal.