September natural gas is set to open 3 cents lower Wednesday morning at $2.59 as traders eye a decrease in the rate of storage surplus attenuation and a commensurate decline in price. Overnight oil markets eased.
In closing comments Tuesday, Tim Evans of Citi Futures Perspective said, "The market was supported primarily by the current cycle of warmer than normal temperatures expected to have limited storage injections for the week ended Aug. 12 to less than the 56 Bcf five-year average for the date.
"There is still time for the consensus expectations to shift before the DOE releases the weekly storage report at 10:30 AM EDT on Thursday, but early indications suggest 25-30 Bcf in refills comparable to last week's 29 Bcf gain.”
With such lean builds the market will continue its trend of tightening supplies under an umbrella of plump, if not burdensome, overall supplies. "[W]e note that the rate of storage injections will be stepping higher as seasonal cooling demand fades and the rate of decline in the surplus may also slow and this may give the market a further opportunity to test the downside on the weeks ahead.
"We continue to see a retreat to a more conservative valuation in the $2.40 to$2.50 range as possible in the weeks ahead, with the recent consolidation near the bottom of the range as just a temporary consolidation on the path lower."
Tom Saal, vice president at FCStone Latin America, in his work with Market Profile said to expect the market to test Tuesday's value area at $2.161 to $2.596. Market Profile is a breakout trading system and identifies trading targets above and below the breakout range. That range, termed the initial balance, is between $2.626 and $2.567, and Saal identifies objectives higher at $2.671 and lower at $2.533.
In overnight Globex trading September crude oil fell 21 cents to $46.37/bbl and September RBOB gasoline eased a penny to $1.4126/gal.