The expiring September natural gas futures contract is expected to open a penny lower Thursday morning at $2.68 as traders factor in estimates of a government storage report as well as a slight moderation in near-term weather projections. Overnight oil markets surged.
Thursday's 10:30 a.m. EDT release of storage data by the Energy Information Administration will give traders an opportunity to hone their estimates of winter supply. Earlier estimates of bin-busting storage over 4 Tcf have now been moderated closer to 3.9 Tcf, but injections going forward look to be robust. Estimates for the week ended Aug. 21, however, look to be no greater than the five-year average.
Last year, 77 Bcf was injected, and the five-year average stands at 61 Bcf. Analysts at IAF Advisors calculate a 61 Bcf injection, as do the folks at ICAP Energy. A Reuters poll of 20 market observers revealed an average 59 Bcf with a range of 47 to 64 Bcf.
Market technicians see futures within a range, with neither the bulls nor bears at present enjoying the upper hand. "2013 or 2014? Which path will natural gas follow into the end of 2015?" said Brian LaRose, market analyst at United ICAP in closing comments Wednesday. "While history favors the bulls, it is quite clear that history (i.e., 2014) does not always repeat. To signal a seasonal advance has the potential to unfold this year, bulls first need to clear $2.939. To derail the possibility of a seasonal advance into the end of 2015, bears need to crack $2.385. Between $2.385 and $2.939 is neutral territory."
Overnight prices held steady as weather forecasts moderated. WSI Corp. in its six- to 10-day outlook said temperatures were "not as warm as previous forecasts across the southern half of the nation and along the West Coast. The northern Rockies and north-central U.S. is warmer. PWCDDs are down 1.7 to 53.3 for the CONUS.
"The forecast has room to waiver a bit in either direction due in part to Erika. The Southeast has the a small downside risk, as does the Northwest. Otherwise, the Plains and Midwest have a risk to the hotter side.
In its 8 a.m. EDT Thursday report, the National Hurricane Center (NHC) said a poorly organized Erika was 85 miles west of Guadeloupe and was holding winds of 50 mph. It was heading west at 16 mph and was projected to move northwest toward Florida and the Georgia-South Carolina coast.
Should Erika make landfall in Florida, it could have a major impact on power demand and spot gas prices in the area. A landfall would entail heavy load-killing rain as well as wind. Industry consultant Genscape believes Erika holds "special intrigue since Florida has not had a full-blown hurricane since Hurricane Wilma in 2005. Moreover, Florida is the largest demand market in SEMA [Southeast Mid-Atlantic] with 14-day average demand figures for the state sitting at 4,149 MMcf/d. If Erika makes landfall, demand could see potential disruption with ramifications for FGT Citygate prices as well."
According to NGI's Daily GPI, FGT Citygate prices rose 18 cents in Wednesday's trading to $3.49.
In overnight Globex trading October crude oil rose $1.34 to $39.94/bbl and October RBOB gasoline gained 6 cents to $1.2885/gal.