August natural gas is expected to open unchanged Thursday morning at $3.09 as traders mull a mix of continuing warm weather and a market that seems relentless in its hold over $3. Overnight oil markets rose.
Market bears expecting to fade any bullish response to Thursday's government storage report will be staring down forecasts of hefty energy demand going forward. "Week ahead power burn demand is to increase 1.4 Bcf/d week/week as a result of upward forecast revisions and warmer temps nationwide," said industry consultant Genscape Inc. in a morning report to clients.
According to Genscape figures nearly 150 cooling degree days (CDD) are anticipated for the Lower 48 at the end of next week, resulting in a gas demand forecast of 64.5 Bcf/d, the highest so far this summer. The Southeast/Mid-Atlantic region is leading the way, peaking at 15.9 Bcf/d and averaging 15.7 Bcf/d through the 12th, followed by Appalachia peaking at 9.5 Bcf/d and the Midwest at 9.3 Bcf/d, and averaging 9.2 and 9.0 Bcf/d respectively.
Genscape added that data shows power burns approaching 35 Bcf/d after the holiday, which would be this season-to-date's high, if forecasts actualize. "This would be a 1.4 Bcf/d increase from the last 7 days, but still lags last year's power burn at this time by 3.5 Bcf/d.” Liquefied natural gas “sendouts are expected to increase 0.7 Bcf/d and Mexican Exports are expected to stay constant (4.3 Bcf/d)."
Thursday's storage report is expected to come in right around a 50 Bcf injection. Last year 41 Bcf was injected and the five-year average is for a 72 Bcf increase.
"Consensus expectations that Thursday's DOE storage report for the week ended June 23 might show a net injection of 52 bcf - less than the 72-bcf five-year average rate - may have also contributed to the stronger price," said Tim Evans of Citi Futures Perspective, commenting on Wednesday’s gains.
Evans said that he "wouldn't rule out" a test of the May 12 high of $3.53 "if the warm weather persists."
Evans forecasts a build of 54 Bcf and IAF Advisors calculates an increase of 51 Bcf. A Reuters survey of 22 traders and analysts showed an average 52 Bcf with a range of +40 Bcf to +60 Bcf.
In overnight Globex trading August crude oil rose 50 cents to $45.24/bbl and August RBOB gasoline gained 2 cents to $1.4894/gal.