October natural gas is set to open a penny lower Thursday morning at $3.84 as traders prepare for a government storage report that is expected to be one of the thinner ones of the injection season but well above historical averages. Overnight oil markets worked lower.
The morning release of storage data is expected to show one of the leaner builds of the season, still well above historical averages nonetheless. Last year, 60 Bcf was injected, and the five-year average stands at 56 Bcf. Expectations for the 10:30 a.m. EDT Energy Information Administration (EIA) report are in the mid- to upper-70 Bcf range. Going forward, traders see much more robust injections once a brief period of late-week warmth dissipates.
"Temperatures will be fairly warm today and Friday over some very important cooling demand states and could help support prices, especially regionally," said Natgasweather.com in a Thursday morning report. "However, by Saturday temperatures will be very pleasant as a fast-moving cool front sweeps through and lasts into early next week. All eyes then turn to the impressive cool blast that will follow at the end of next week, which should push quite deep into the southern U.S.
"There should be cold enough temperatures within the core of this weather system to drive modest heating demand over portions of the northern Plains, Midwest and Northeast. However, it should be a fairly quick blast of cooler temperatures and not last more than 24-48 hours. More importantly, much more pleasant temperatures will also set up over the southern U.S., where cooling demand will be lower than normal to counter. And as a result, future builds will be much larger than normal, especially when considering there will be a mild and very comfortable pattern to follow for the third week of September."
Analysts at United ICAP calculate a 72 Bcf increase, and Bentek Energy is looking for an injection of 77 Bcf. A Reuters poll of 23 traders and analysts revealed a sample mean of 73 Bcf with a range of 68-76 Bcf.
Tom Saal, vice president at INTL FC Stone in Miami, in his work with Market Profile said, "One of the best features of Market Profile is untested value areas in any time frame. Looking at [Thursday's] daily Market Profiles show three untested value areas…that should be tested soon."
Saal expects the market to test $3.860 to $3.838 followed by a test of a second value area at $3.947 to $3.899. "Eventually," he sees $4.053 to $4.031 being tested as well. "Usually on EIA storage report day the market shows a lot of price volatility and now there are pricing targets. In addition, due to EIA, I expect to see a Market Profile neutral day pattern -- large price moves in both directions," he said in Thursday morning comments to clients.
Technical traders see holding $3.80 as key to the resumption of any price advance. Brian LaRose, a technical analyst at United ICAP, "peg[s] $3.805-3.781 (0.7862-0.852) as the lowest levels consistent with any corrective retreat. Carve out a bottom in front of this zone, and the bulls will have an opportunity for a larger degree recovery," he said.
"Fail to hold above $3.805-3.781 and the A=C objectives from $4.886 will be our next downside targets; 0.618 [of] "a"="c" targets $3.487-3.383. [An entire] "a"="c" is down at 2.939."
In overnight Globex trading October crude oil retreated 83 cents to $94.71/bbl and October RBOB gasoline eased fractionally to $2.6186/gal.