Building on the bullish momentum from a sharp rebound in prices the previous session, natural gas futures surged higher in early Thursday trading despite analysts spotting few clear signals from forecasts or fundamentals. The September Nymex futures contract was trading 7.6 cents higher at $2.309/MMBtu shortly after 8:30 a.m. ET.
In terms of total demand expectations, the overnight weather models came in roughly flat versus 24 hours earlier, according to Bespoke Weather Services.
Forecast gas-weighted degree days (GWDD) “over the next 15 days remain above normal, though not extreme, as heat developing across Texas and parts of the South so far is unable to spread up more into the Midwest and East, where variability remains the rule,” Bespoke said. In terms of fundamentals, “production did barely set a new all-time high yesterday per our dataset. Burns remain strong given the current GWDD levels,” and liquefied natural gas exports “remain stable.”
The 9.6-cent rebound in Wednesday’s session raised the prospect that the September contract would go on to test resistance around $2.29-2.34, according to EBW Analytics Group CEO Andy Weissman. The surge in prices Wednesday came even as fundamentals “remained largely unchanged,” he said.
“Given the speed and severity of the sell-off that began in mid-July, this correction is not at all surprising,” Weissman said.
As for today’s Energy Information Administration (EIA) report, EBW favors an injection in the low-50s Bcf, on the lower side of market expectations, which could support a continued rally.
“We continue to believe, though, that the rebound that began yesterday will have only a limited life,” Weissman said.
Estimates have been pointing to an above-average build for the EIA report, scheduled for release at 10:30 a.m. ET. A Bloomberg survey as of Wednesday showed a median expectation for EIA to report a 59 Bcf build for the week ended July 26, based on estimates ranging from 52 Bcf to 67 Bcf. A Reuters survey pointed to a 57 Bcf injection, with predictions from 49 Bcf up to 67 Bcf.
Intercontinental Exchange EIA Financial Weekly Index futures settled Wednesday at 60 Bcf for this week’s report. NGI’s model predicted a 58 Bcf injection.
Last year EIA recorded a 31 Bcf injection for the period, and the five-year average build is 37 Bcf.
September crude oil futures were trading $1.11 lower at $57.47/bbl shortly after 8:30 a.m. ET, while September RBOB gasoline was off around 3.7 cents at $1.8263/gal.