October natural gas is set to open 3 cents higher Thursday morning at $2.71 as traders factor in a government inventory report that is expected to show continuing increases below historical norms. Overnight oil markets advanced.
The 51 Bcf injection reported last week caught traders by surprise and was outside of all the estimates polled by Reuters. The highest the Reuters survey showed was 48 Bcf, and this week could come in high as well.
Last year, a plump 79 Bcf was injected, and the five-year pace stands at 64 Bcf. IAF Advisors calculates a 41 Bcf increase, and industry consultant Bentek Energy, utilizing its flow model, is figuring on a 45 Bcf injection. A Reuters survey of 19 industry cognoscenti showed an average of 43 Bcf with a range of 35 to 51 Bcf.
"Last week's big build came largely by way of a bigger-than-expected build in the Midwest region - this was easily 5 Bcf higher than anybody had expected," said John Sodergreen, editor of The Desk's weekly Tealeaves report. "This week we see a slightly different scenario. The experts say that last week's weather was about 7% warmer than the five-year average and 5% warmer than last year, same week.
"Nonetheless, we think that the EIA will again come in a wee bit higher than the market, due to the pre-holiday vacation volatility index (people leaving early and not reporting correctly), the emerging storms everywhere, moderate CDD bumps, slightly fewer outages and general lack of heating demand for this time of year. More importantly, pre-and post-holidays are tricky and history shows we all tend to underestimate in advance of Labor Day."
Forecasters see an eventual return to normal injection patterns. "[A]fter natgas demand again increases to stronger than normal levels this week, a more seasonable pattern is expected to become established for the second half of September where much of the natgas demand will be driven by the warmer southern U.S.," said Natgasweather.com in a noon update. "There have yet to be any signs of significant early season cool fronts coming to the northern U.S., which overall will keep weather sentiment bearish as larger builds in supplies arrive, a few of which will finally be near normal."
In overnight Globex trading October crude oil rose 77 cents to $46.27/bbl and October RBOB gasoline added 3 cents to $1.3770/gal.