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First Non-Triple-Digit Build In 12 Weeks On Tap; November Seen Up a Penny

November natural gas is set to open a penny higher Thursday morning at $3.81 as traders await market-driving information in the form of weekly government storage figures. Overnight oil markets continued to melt.

If there were concerns that the high pace of injections might come to a halt sometime soon, it will not be because of increased heating and cooling requirements. The National Weather Service expects well below normal degree day (DD) accumulations for the week of Oct. 18, which should impact next week's storage figures. Combined heating and cooling degree days in New England are anticipated to be 50, or a stout 54 DD below normal. The Mid-Atlantic is forecast to see 34 DD, or 56 fewer than its seasonal tally. The greater Midwest from Ohio to Wisconsin is set to "enjoy" 47 DD, or 48 fewer than normal.

This week's builds are forecast to be the first week in the last 12 that won't break the triple-digit threshold. The year-on-five-year deficit, nonetheless will likely continue to contract. Last year, 79 Bcf was injected, and the five-year average is a 78 Bcf increase. Analysts at United ICAP predict an 87 Bcf build, and First Enercast is looking for an 86 Bcf injection. A Reuters poll of 25 traders and analysts resulted in a 91 Bcf average with a range of 78-106 Bcf.

Bentek Energy's flow model figures on a 90 Bcf injection. "The expected injection brings inventories close to 3.3 Tcf by only the second week of October, and similar weather for the next few weeks makes peaking above 3.5 Tcf by the end of the month more likely as seasonally strong injections are expected to continue for at least the next two weeks and potentially into November," Bentek said. "Residential and commercial demand reached its highest level since early May and averaged 16.5 Bcf/d during the week, which was an increase of 4.1 Bcf/d from the previous week. The uptick in residential and commercial was partly offset by declining power burn demand, which fell 0.8 Bcf/d week-over-week to average 22.3 Bcf/d."

Should prices break below their recent trading range, analysts look for a long-term buying opportunity. "[We] Peg $3.727-3.711 as critical support. Fail to carve out a bottom into this zone and we will be looking for a test of the lower bounds of our proposed falling wedge, somewhere between 3.460 and 3.016," said Brian LaRose of United ICAP. "The next cycle low in the 35-month bottoming cycle is slated for March of 2015. A break below key support will likely be a big long-term buying opportunity."

In overnight Globex trading November crude oil fell $1.34 to $80.44/bbl and November RBOB gasoline lost a penny to $2.0865/gal.

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