Coming off a wild day of ups and downs, and with the market still mulling the implications of a large weekly inventory build, natural gas futures were trading several cents lower early Thursday. The September Nymex futures contract was down 7.2 cents to $2.130/MMBtu shortly after 8:30 a.m. ET.
The overnight weather data maintained cooler trends that had showed up in Thursday’s guidance but did not trend additionally cooler, according to NatGasWeather.
“There will still be bouts of heat, especially across the southern U.S., but it’s now the northern U.S. where the pattern doesn’t look nearly hot enough the next two weeks, with highs only reaching the 70s and 80s for relatively light demand,” the forecaster said.
“All week we have been stating we didn’t believe weather patterns were hot enough to justify the Wednesday-Thursday move higher, and we hold firm to that stance, especially when considering the next several storage reports are favored to print larger than the five-year average.”
The Energy Information Administration (EIA) on Thursday reported a larger-than-expected 65 Bcf injection into U.S. natural gas stocks for the week ended July 26, compared to a 31 Bcf injection recorded a year-ago and a five-year average of 37 Bcf.
Total Lower 48 working gas in underground storage stood at 2,634 Bcf as of July 26, 334 Bcf (14.5%) higher than last year’s stocks but 123 Bcf (minus 4.5%) lower than the five-year average, according to EIA.
Raymond James & Associates Inc. analysts said the 65 Bcf build implies the market was 2.6 Bcf/d looser versus the same week last year on a weather-adjusted basis. The market has averaged 2.5 Bcf/d looser over the past four weeks, according to the analysts.
The bearish EIA print drove prices lower during a rollercoaster day of trading Thursday. The front month rallied to as high as $2.333 early in the day as news spread of an explosion on the Texas Eastern Transmission (Tetco) system in Kentucky, only to reverse on EIA’s storage number, eventually settling some 13 cents off the day’s highs.
Analysts with Tudor, Pickering, Holt & Co. (TPH) quipped that “the gas market was gyrating like a young Freddie Mercury yesterday,” referring to the former front man for Queen, “as the Tetco explosion sent prices upward to open the day, only to have a disappointing storage print take the wind out of the sails.”
On the impacts of the Tetco explosion, “early indications are that a portion of the gas will be re-routed toward the Dominion South/Lebanon hubs; however, a share of this roughly 1.3 Bcf/d of gas flowing prior to the explosion is likely to be shut in,” the TPH team said.
As for the latest EIA data, the 65 Bcf build shows the market about 3 Bcf/d oversupplied during the period, according to the analysts.
September crude oil futures were up $1.22 to $55.17/bbl shortly after 8:30 a.m. ET, while September RBOB gasoline was up about 3.5 cents to $1.7848/gal.