October natural gas is set to open 2 cents higher Thursday morning at $3.02 as traders assess what could be a bearish double whammy of a violent load-killing hurricane headed for Florida and a government storage report expected to give insight into last week's impact on supply and demand from Hurricane Harvey. Overnight oil markets were mixed.
Longer term forecasts are expected slightly warmer, according to forecaster WSI Corp. in its morning 11- to 15-day outlook. "[Thursday's] forecast is somewhat warmer than yesterday's outlook over much of the Midwest and East, except perhaps along the northern tier, and slightly cooler over the interior west-central U.S.”
Risks to the forecast include temperatures running "still warmer over much of the eastern third of the U.S. if a trough does not redevelop across this region. However, models show significant inconsistency with each other and previous runs. Furthermore, any tropical activity approaching the East Coast could support the development of another deep trough in its wake."
WSI also said that the course of deadly Hurricane Irma has not been fully determined, but its load diminishing properties are highly dependent on what direction it takes. For now, "Irma will track to the west-northwest between the Bahamas and northern coast of Cuba by Saturday and will begin to threaten southern Florida with gusty winds and squalls. Then during Saturday night and Sunday, the center of Major Hurricane Irma will turn northward toward southern and eastern Florida.
"The center of the system will remain on a northerly track that will bring Irma near eastern Georgia into the Carolinas by Monday and Tuesday. The exact track still needs to be fined tuned and is critical to the severity of the impacts. Any small shift with the track has major implications. Nonetheless, damaging winds, flooding rain, surge, high waves, coastal erosion, etc, are major concerns. As a result, power outages are likely across Florida into the eastern Georgia and the Carolinas, including FPL, Progresses Energy Florida and Carolinas, Southern Company, SCE&G and Santee Cooper (SCPSA)."
Traders don't want to be short natural gas this time of year, even with a load-killer like Irma on the horizon.
"I'm impressed with the market's ability not to fall too far below $3," Tom Saal, vice president at FCStone Latin America in Miami told NGI as he was preparing for what looked like an onslaught from Hurricane Irma.
"Even with the low demand summer we have had, I think it shows underlying fundamental support from exports. Going forward the fundamental story of the year is exports.
"[Demand loss from Irma] could bring the market down to test support levels we have been seeing in the low $2.80s if that were the case. Power could be knocked out for a lot of people in the States.”
Thursday's Energy Information Administration (EIA) storage report might prompt a test of support on its own. Estimates are coming in well above seasonal norms. Last year 38 Bcf was injected and the five-year pace stands at 58 Bcf, but this week's numbers are coming in in the 60 Bcf range. Stephen Smith Energy Associates predicts a fill of 67 Bcf and ION Energy's Kyle Cooper calculates a 64 Bcf increase. A Reuters poll of 22 traders and analysts revealed an average 64 Bcf with a wide range of plus 30 Bcf to plus 83 Bcf.
In overnight Globex trading October crude oil fell 43 cents to $48.73/bbl and October RBOB gasoline added a penny to $1.6790/gal.