With the Energy Information Administration (EIA) expected to report a second straight smaller-than-normal storage injection thanks to last week’s heat, natural gas futures were trading slightly higher early Thursday. The August Nymex contract was up 2.2 cents to $2.242/MMBtu just after 8:30 a.m. ET.
Estimates have been pointing to a below-average injection in the 30s Bcf for this week’s EIA report, scheduled for release at 10:30 a.m. ET. A Bloomberg survey showed a median prediction of 37 Bcf for the period ended July 19, based on 12 estimates ranging from 31 Bcf to 45 Bcf.
Intercontinental Exchange EIA Financial Weekly Index futures settled Wednesday at 35 Bcf. NGI’s model predicted a 33 Bcf build.
Last year, EIA recorded a 27 Bcf build for the period, and the five-year average is a 44 Bcf injection.
“Data for last week is pointing to record gas demand for power generation, averaging 41.9 Bcf/d to surpass the prior high of 41.2 Bcf/d set last August, which we expect will drive a second consecutive storage print below the five-year average,” analysts with Tudor, Pickering, Holt & Co. (TPH) said.
But this run of below-average builds, which includes the 62 Bcf injection EIA reported last week, could be short-lived.
“With temperatures dropping, current-week data is showing a roughly 2.6 Bcf/d drop in week/week power demand,” the TPH analysts said. As this also coincides with liquefied natural gas feed gas demand falling about 0.8 Bcf/d off recent highs, “we expect a return to larger than normal builds.”
As for the temperatures during this week’s report period, NatGasWeather noted that “it was hotter than normal over most of the country besides where Barry drenched the southern Mississippi Valley and across the Northwest where showers brought cooling. Our algorithm predicts a build of 32 Bcf, a touch to the bullish side.”
Meanwhile, the forecaster viewed the overnight guidance as mixed, with the Global Forecast System (GFS) trending “barely cooler” and the European model shifting “barely hotter.”
“We continue to see ways flaws in the hot ridge are exposed in early August where weather systems bring areas of showers and cooling across the southern and eastern U.S., preventing bullish weather sentiment from setting up,” NatGasWeather said. “There will be strong regional demand across the West, Plains and West Texas, but not enough to counter more comfortable conditions eastward.
“The European model remains hotter with the ridge to start August, while the GFS favors stronger cool shots. This difference will need to be resolved, but the burden is on the hotter European model proving it, especially after being much too hot with recent forecasts.”
September crude oil futures were trading 90 cents higher at $56.78/bbl shortly after 8:30 a.m. ET, while August RBOB gasoline was up about 2.3 cents to $1.8785/gal.