November natural gas is set to open a penny lower Thursday morning at $2.99 even though traders expect a government report to show a hefty reduction in the ongoing storage surplus. Overnight oil markets were mixed.
All indications are that there will be another sharp reduction in the storage surplus once the Energy Information Administration (EIA) reports weekly storage data. Last year a plump 99 Bcf was injected, and the five-year pace stands at a stout 97 Bcf. Estimates are coming in closer to 50 Bcf.
IAF Advisors calculates a build of 52 Bcf, and a Reuters poll of 17 traders and analysts showed an average 55 Bcf with a range of 50 to 65 Bcf. Industry consultant Bentek Energy, utilizing its flow model, expects a 53 Bcf increase and said, "This week and last week have much in common from a fundamental perspective with U.S. demand, Canadian imports, and exports to Mexico close to flat week over week. However, production was down slightly when compared to last week and LNG feed gas deliveries to Sabine Pass totaled about 7 Bcf lower week over week."
The Desk Tealeaves report showed an average 54 Bcf, "a wee bit higher [as] the swings between builds and draws in the south-central region has made this season tricky indeed. And while last week the region called a 2-Bcf draw, and some analysts are seeing a flat report out of the region this week, our latest Tealeaves see a small build, in line with our salt dome theory."
Longer term, AllianceBernstein sees storage running a deficit to long-term averages with a commensurate rise in prices. "While gas storage has been above the five-year average in 2016, we expect that gas disposition will move sharply in the opposite direction in 2017. With supply falling while new export projects increase gas demand, storage will drain, falling well below the five-year average by mid-year. This will cause price to spike, possibly above $4/Mcf," the firm said in a note to clients.
In its 8 a.m. EDT report the National Hurricane Center (NHC) said Tropical Storm Matthew was 300 miles south of San Juan Puerto Rico and was heading to the west at 16 mph. It was holding winds of 70 mph and NHC predicted it would make a sharp turn north when it reaches the western Caribbean toward the eastern end of Cuba.
In overnight Globex trading November crude oil rose 5 cents to $47.10/bbl and November RBOB gasoline dropped a penny to $1.4284/gal.