July natural gas was set to start trading unchanged Thursday morning at $2.47as traders await the release of government storage figures expected to continue the trend of below-average inventory increases. Overnight oil markets fell.
Forecasters are having a difficult time with their weather models. Commodity Weather Group in its Thursday morning six- to 10-day outlook shows above-normal temps from North Dakota to Colorado and from Wyoming to eastern Illinois. "June continues to be a more difficult month to measure as the models continue to oscillate between hotter and cooler changes. Over the past 24 hours, the three major ensemble guidance (European, American, Canadian) sources have all shifted back cooler again, especially toward the Midwest and East," the company said.
"Slight demand losses are noted with the model consensus, but our outlook holds closer to steady. We have been holding that steadier ground by not warming up as strongly as the models and also not flipping cooler as aggressively."
In its recent production report, EIA said marquee producing states such as Ohio, Pennsylvania and West Virginia all registered declines. Ohio and West Virginia declined by 3% or more month to month and Pennsylvania was down 1.8%.
Production declines are a major factor that additions to storage can't meet short- and long-term injection averages. Last year, 117 Bcf was injected, and the five-year pace stands at 96 Bcf.
This week's figures are coming in sharply lower. JP Morgan calculates a build of 74 Bcf and, Ritterbusch and Associates is looking at an increase of 87 Bcf. A Reuters survey of 20 traders and analysts resulted in an average of 78 Bcf.
Bentek Energy’s flow model figures on a 74 Bcf build but cautions that "because the storage week contained a holiday, the macro risk to this week's forecast is likely to a larger injection rather than a smaller one. Week-over-week, the largest changes in storage activity are estimated to have occurred in the East and Pacific EIA regions."
In overnight Globex trading July crude oil dropped 57 cents to $50.66/bbl and July RBOB gasoline shed 3 cents to $1.5932/gal.