September natural gas is set to open about a penny lower Thursday as traders look ahead to the 10:30 a.m. EDT release of the Energy Information Administration's storage report for the week ended Aug. 11.
Most estimates are calling for an injection slightly below the five-year average but well above the prior week's 28 Bcf build.
A Bloomberg survey produced an injection range spanning from 35 Bcf to 58 Bcf with a median expectation of a 49 Bcf build. For the same week last year a date-adjusted 23 Bcf was injected and the five-year average build for the week sits at 50 Bcf.
"Stronger injections are supported by supply and demand fundamentals for the week," PointLogic Energy analyst Callie Kolbe wrote in a Thursday note to clients. "Week-on-week supply increased by 0.14 Bcf/d and demand softened by 0.6 Bf/d.
"The largest move on the demand side was power burn, which fell by 1.7 Bcf/d week-on-week. The week-over-week decline in power demand was regionally driven in the West, Midwest and Northeast. However, within the South Central region, power demand in the Southeast increased nearly 0.5 Bcf/d, offsetting a decline of 0.3 Bcf/d in Texas, which adds a low-side risk to this week's report. Upside risk this week could come from the East region, where Northeast production averaged 24 Bcf/d after hitting a record high of 24.23 Bcf/d on Aug. 4."
NatGasWeather.com said Thursday its algorithm is calling for a 50 Bcf injection, noting that during the report week "it was cooler than normal over most of the country besides the West and far South, considerably so over the central U.S."
As for the rest of August, "the overnight weather data maintained hotter trends for the first half of next week, although the market seems more disappointed about seeing cooler trends over the East late next week, and also cooler trends for the last several days of August,” the firm said.
"It's still expected to be warm to hot over the next seven days over large portions of the country to further reduce surpluses versus the five-year average, just not as fast of a pace after and to close out August."
On the technical side, the bears are in control, but the bulls have a chance to establish a bottom in the $2.75/MMBtu range, Brian LaRose of ICAP Technical Analysis wrote.
"For the moment the technicals favor the bears, hence the downtrend," LaRose wrote. "But while the bears may be in control technically, they still need to crack $2.753 to confirm the seasonal downtrend is alive and well. Succeed and a drop to $2.657, even the $2.538-$2.522-$2.470 neighborhood is still very much possible," LaRose said. "As long as natural gas holds $2.753, bulls have an opportunity to grind out a bottom."