October natural gas is set to open 3 cents lower Thursday morning at $3.88 as traders await storage data that is expected to continue an ongoing process of deficit contraction relative to both last year and the five-year average. Overnight oil markets rose.
The 10:30 a.m. EDT release of storage data by the Energy Information Administration will give analysts further insight into supplies as the injection season winds down.
Comparisons to last year's 82 Bcf injection and the five-year average of 79 Bcf are looking decidedly bearish as most estimates are coming in around 90-plus Bcf with some reaching the century mark. First Enercast calculates a build of 89 Bcf, and analysts at United ICAP are looking for an increase of 97 Bcf. A Reuters survey of 25 traders and analysts revealed a sample mean of 94 Bcf with a range of 88-101 Bcf.
Industry consultant Genscape calculates a build of 100 Bcf and said its estimate is based on a "composite of our supply and demand flow model -- which is expecting an 81 Bcf injection -- and our adjusted sample of storage facilities -- which is predicting a 101 Bcf injection. Last year, 87 Bcf was injected for the same storage week, and the record high for the week was 111 Bcf set in 2011," the company said in a report.
Bentek Energy's flow model calculates an increase of 97 Bcf. "With only seven weeks left until the end of October, including this Thursday's announcement, storage builds will have to average near 87 Bcf per week in order to reach 3.5 Tcf by October's end," Bentek said. The firm said it expects inventories will end October close to that mark and continue to rise into November, eclipsing 3.5 Tcf at peak inventory levels.
"Power demand continues to fall, driving sample injections higher in both the East and Producing regions to levels noted during the first shoulder season," Bentek said. "The West Region's lagging injections helped keep the overall U.S. number below 100 Bcf for the week, [and] salt dome fields within Bentek's sample recorded their largest injection since the July 11 storage week while the East Region saw higher injections driven largely by fields focused in the Northeast, such as TCO, Dominion and Steckman Ridge."
The weekly storage reports can be an excellent test of the Market Profile methodology, and Tom Saal, vice president at INTL FC Stone in Miami, is looking for "pricing targets result[ing] from estimated upward momentum price action. The 50% target, at $3.948, is the easiest target to achieve once the market trades outside its 'initial balance.' The weekly 'initial balance' is the price range of Monday and Tuesday for pit trading hours only. The October 2014 natural gas contract expires tomorrow...the price looks higher from here," he said in a Thursday morning report to clients.
In overnight Globex trading November crude oil gained 61 cents to $93.41/bbl and November RBOB gasoline rose 4 and a half cents to $2.5574/gal.