October natural gas is set to open unchanged Thursday morning at $4.01 as traders get set to factor in another balloon-like addition to natural gas inventories that is expected to be well above historical averages. Overnight oil markets were mixed.
"I'm hearing a pretty big number, about 90 Bcf," said a New York floor trader. "The range is anywhere from 82 Bcf to 101 Bcf, and that's a significant number considering last year was only 48 Bcf and the five-year average is 71 Bcf. I think if the number comes in anywhere near there, I think we'll see this market come off. I'm thinking if it comes in that way we'll see a settle under $4, and then we are back in our [$3.75-4.00] range."
Others are also looking for an injection in the 90 Bcf area. Analysts at United ICAP forecast an 89 Bcf build, and Ritterbusch and Associates expects an increase of 95 Bcf. A Reuters poll of 29 industry cognoscenti revealed an average 90 Bcf with a range of 81-96 Bcf.
Bentek Energy's flow model calculated an 88 Bcf build, and the firm said, "Power burn demand fell drastically from the previous week, but an offsetting move in res/comm demand helped keep total demand from falling significantly, as U.S. average demand declined only 0.7 Bcf/d despite power burn demand falling 1.9 Bcf/d." Bentek said forecasts utilizing its supply-demand model diverged from the flow model "with the fundamentals pointing toward a stronger build week-over-week [93 Bcf] while the sample injections remained largely flat."
Gas buyers seeking to augment electrical generation across the broad Midwest Independent System Operator (MISO) footprint may have a relatively easy time near term if forecasts calling for cool, wet and windy conditions prove correct. WSI Corp. in its Thursday morning report said MISO would see "fleeting high pressure support[ing] fair and seasonably cool conditions across a good portion of the power pool [Thursday]. High pressure will depart during Friday, allowing a complex frontal system to bring some rain and storms back into the region during Friday into the weekend. Rainfall amounts may range either side of 0.25 inches.
"Meanwhile, a southerly flow ahead of the expected storm system will support much warmer and even slightly humid conditions. Cooler and drier high pressure should settle in behind this system late in the weekend into the start of next week. An increasing southerly flow between high pressure and a frontal system should drive up output levels today into Saturday. Output may peak upward of 6-7 GW. A northwest breeze behind the system may continue to prop up generation during the weekend, but output is expected to abate by Monday."
In overnight Globex trading October crude oil fell 32 cents to $94.10/bbl and October RBOB gasoline gained fractionally to $2.5695/gal.