November natural gas is set to open 3 cents lower Wednesday morning at $2.56 as traders now see November as a net injection month and a tropical storm is seen grazing the East Coast. Overnight oil markets fell.
Analysts now expect an extended injection season carrying through the end of November -- and a stunted seasonal price rally. "The gas storage injection season typically takes place between April 1st and Oct. 31st each year. The industry does commonly report net weekly injections in the first weeks of November," Teri Viswanath, director of natural gas strategy at BNP Paribas, said in a note to clients Tuesday.
She said that as heating demand rose in November, it was unusual to see a net build for the month. "Since the mid-1970s, there have been four years in which monthly injections have been recorded for November. Given our domestic production and demand growth projections, and assuming normal weather patterns, we expect that the industry will likely report the fifth net monthly build for November in 2015. All told, we see working gas in storage increasing 40 Bcf over November to 4 Tcf.
"While we think a seasonal rally for gas is still in the making, the lift-off will now likely be delayed. Moreover, supply-side adjustments will lessen the need to call upon inventory to meet peak winter demand. The end result will be a truncated price rally this winter with high-end March stocks limiting the scope of recovery during the first half of 2016."
Natgasweather.com sees Tropical Storm Joaquin generating load-killing showers and thunderstorms along the East Coast "if it can get absorbed by another slow-moving system stalled over the east-central U.S."
At 8 a.m. EDT, the National Hurricane Center reported that Hurricane Joaquin was 245 miles east of the Bahamas and was sporting winds of 75 mph. It was moving to the southwest at 6 mph but was expected to head north toward the Carolinas.
Otherwise, the near-term weather outlook is benign. "Mixed changes are noted overnight nationally," said Commodity Weather Group in its morning report. "We see some cooler adjustments again in the West during the six-10 day, while the Midwest to East are slightly warmer. The 11-15 day changes split in the East, with a cooler start but then warmer finish. The warmest 11-15 day anomalies are in the Western states.
"Overnight models were mixed, but warmer trends at end. Models saw a net demand addition overall overnight, but the individual runs were mixed in this variable pattern situation," said Matt Rogers, president of the firm..
In overnight Globex trading November crude oil shed 25 cents to $44.98/bbl and November RBOB gasoline fell fractionally to $1.3462/gal.