With the market awaiting details on a potentially much larger-than-average injection from the Energy Information Administration’s (EIA) weekly storage report, natural gas futures were trading slightly lower early Thursday. The May Nymex futures contract was off 1.2 cents to $2.505/MMBtu at around 8:30 a.m. ET.
Estimates for the EIA storage report point to a build in the upper 80 Bcf range. A Bloomberg survey of 11 analysts had an injection range from 52 Bcf to 96 Bcf, with a median of 86 Bcf. Intercontinental Exchange EIA Financial Weekly Index futures settled Wednesday at a build of 95 Bcf. NGI projected an 87 Bcf build.
Last year, the EIA reported a 34 Bcf withdrawal, and the five-year average injection is 21 Bcf. Inventories as of April 5 stood at 1,155 Bcf, which is 183 Bcf below year-ago levels and 485 Bcf below the five-year average, according to EIA.
“It was warmer than normal over most of the country besides the far northern U.S.” during this week’s report period, NatGasWeather said, adding that it’s looking for a build to the bearish side of estimates at around 96-97 Bcf. “If today’s report were to print 100 Bcf or larger, it would further confirm production has become much too strong compared to demand.”
As for the overnight data, NatGasWeather viewed the latest guidance as mostly unchanged but continuing to lean in the warmer direction.
The data favors an “uber bearish U.S. pattern well into May due to exceptionally comfortable temperatures apart from brief local cooling when weather systems with heavy showers and powerful thunderstorms sweep through,” the forecaster said. “...Bears made big strides this week pushing May futures toward $2.50,” but prices could see a technical bounce, “especially if they are able to drop into the $2.40s before some profit taking ensues.
“Going into the long holiday weekend with markets closed Friday, weather trends likely won’t be hot or cold enough to impress, keeping weather sentiment bearish.”
The front month fell 5.5 cents Wednesday, a sell-off that was sharper than analysts at EBW Analytics Group had been expecting and dropped the front month to a three year low, according to the firm.
“Just as significantly, a key support level at $2.522 failed, potentially opening the door to further losses,” EBW CEO Andy Weissman said. “This surprisingly strong sell-off most likely was due to the publication of analyst estimates” Wednesday “predicting that EIA will announce a huge storage build this morning.
“...While we have been predicting that this week would mark the start of an extended string of monster injections for some time,” the reaction from the market Wednesday indicates that prior to seeing estimates for this week’s report “many traders were not yet anticipating the tsunami of large injections this spring.”
The upcoming EIA report could determine whether $2.50 support holds in the front month, according to EBW.
With the market closed for Good Friday, “if EIA reports an injection in the mid to high 80 Bcf range, profit taking could reverse some or all” of Wednesday’s losses, according to Weissman. “A build close to 100 Bcf, however, could cause support at $2.50 to fail, sending prices down several more cents.”
May crude oil futures were up 24 cents to $64.00/bbl shortly after 8:30 a.m. ET, while May RBOB gasoline was up about 1.5 cents to $2.0572/gal.