November natural gas futures were trading close to even at around $2.980/MMBtu as of 8 a.m. ET Thursday, with the market taking a breather ahead of the release of government storage data expected to show a leaner than average build.
Estimates for the Energy Information Administration (EIA) storage report, set for release at 10:30 a.m. ET, have pointed to an injection well below the five-year average, an expectation that likely factored into the sustained price gains going back to last week.
A Bloomberg survey of traders and analysts produced a range of 52 Bcf to 77 Bcf, with the median prediction for a net build of 61 Bcf for the week ended Sept. 21. That compares to a five-year average build of 81 Bcf and a 64 Bcf build recorded a year ago. Kyle Cooper of IAF Advisors called for a 52 Bcf injection, and Intercontinental Exchange (ICE) EIA financial weekly index futures settled Wednesday at an injection of 52 Bcf.
Last week, EIA reported an 86 Bcf injection into working gas stocks for the week ended Sept. 14, putting stockpiles at roughly an 18% deficit to the five-year average.
“It was warmer than normal over most of the country except portions of the West” during this week’s storage report period, although impacts from Hurricane Florence made predicting the final build more difficult, according to NatGasWeather.
“Our analysis sees it at 56-57 Bcf, under national surveys,” but ICE futures trading on the low side suggests “the markets could see surveys being too high,” the firm said.
As for the overnight weather data, NatGasWeather noted only minor changes from recent bearish trends.
“There remains potential for stronger cool blasts across the northern U.S. Oct. 5-7, although the data continues to see the core of the coldest air impacting the Rockies and Plains, thereby only providing minor cooling across the Great lakes and Ohio Valley,” the firm said. “...Overall, the coming pattern has been bearish trending the past two days,” likely aiding Wednesday’s selling. “But what will be most important” is whether November futures can retake $3 after EIA’s report.
Looking at the technicals, the November contract failed Wednesday “right in front of critical resistance,” according to ICAP Technical Analysis analyst Brian LaRose.
“The question now, is this just much needed relief for a short-term overbought condition? Or is a plunge back to the $2.730 neighborhood getting underway?” LaRose asked. “Bears will need more than a one-day pullback to signal the latter. I’m inclined to treat this pullback as a rest stop until/unless the bears flip the intraday technicals back in their favor and do more damage.”
November crude oil futures were trading about 78 cents higher at around $72.35/bbl shortly after 8 a.m. ET Thursday, while October RBOB gasoline was up about 1.8 cents to around $2.0760/gal.