With weather data pushing back on the timing of returning heat and natural gas traders eyeing another larger-than-normal storage injection, futures prices were set to open slightly lower Thursday morning. The July Nymex gas futures contract was trading at $2.369, down 1.7 cents, at around 8:30 a.m. ET.
Even after a string of small gains earlier this week, natural gas futures have struggled to move meaningfully above recent lows. The latest weather models took a bearish turn as both the American and European data trended slower with the return of ridging into the South and East, according to Bespoke Weather Services.
Although the models still show such a pattern at the end of outlooks, “for now it appears to be just a timing change in the modeling as opposed to a fundamentally different pattern,” Bespoke chief meteorologist Brian Lovern said.
The early morning American ensemble model shifted a bit hotter in the 11- to 15-day forecast compared to the overnight run, so Bespoke said it would be watching the midday run closely to see if it moved back in that direction as well. “We feel the pattern signals still argue for some late-month heat risks as the El Niño state should back down for awhile, similar to what we saw in the pattern in the second half of the month of May. Best chance of heat would be in the South, occasionally migrating up into the Mid-Atlantic as well.”
With significant heat taking a back seat for now, the natural gas market is eagerly awaiting the Energy Information Administration’s (EIA) storage inventory report, which for the last two weeks has come in far above expectations. This week’s report is scheduled for release at 10:30 a.m.
Estimates are pointing to another triple-digit storage build for the week ending June 7. A Bloomberg survey of 12 analysts had an injection range of 98 Bcf to 124 Bcf, with a median of 110 Bcf. A Wall Street Journal poll had a range of 102 Bcf to 118 Bcf, with an average of 108 Bcf. A Reuters survey had an injection range of 100 Bcf to 124 Bcf, and a median of 109 Bcf. NGI is projecting a 108 Bcf injection.
The market, said Lovern, “wants to make sure we do not get a third bearish miss in a row, as that would seemingly be a clearer indication that there is more gas in the market than the data is telling us.”
Last year, the EIA reported a 95 Bcf increase to inventories for the similar week, and the five-year average stands at 92 Bcf.
A meaningful price response will be highly correlated to the storage build in comparison to last week’s 119 Bcf injection, according to Mobius Risk Group. Overall degree days were similar, and the reference week was not impacted by a holiday like the prior reporting period.
“Linearly, it is reasonable to expect the result to be between 102 and 107 Bcf. A meaningful deviation from this range would extend the recent trend of week-to-week volatility relative to weather, and importantly add confusion to supply/demand expectations for the remainder of the injection season,” Houston-based Mobius said.
Crude oil futures were trading more than $2 higher at around $53.25/bbl after two oil tankers reportedly were attacked early Thursday in the Gulf of Oman amid heightened tensions between the United States and Iran. RBOB gasoline futures were trading nearly a nickel higher at around $1.73/gal.