Cooler overnight forecast trends ahead of the latest round of Energy Information Administration (EIA) inventory data had natural gas futures trading slightly lower early Thursday. The September Nymex futures contract was down 1.3 cents to $2.157/MMBtu as of 8:30 a.m. ET.
Heading into Thursday’s trading, forecasts shifted cooler for the balance of August and the first few days of September, according to Bespoke Weather Services. The American model showed the “most drastic” change by dropping 15 gas-weighted degree days (GWDD) from the outlook compared with 24 hours earlier.
The European data, “while cooler, has only dropped a couple of GWDDs in its forecast, and is our preferred model this morning,” with the American dataset “likely having gone too far in the cooler direction,” Bespoke said. “We still view this as a cooler window in the overall hotter background state as opposed to a lasting change in pattern, with the idea being that above normal heat can return to the eastern half of the nation after the early part of September.”
In terms of prices, “downside should be limited from here barring major weakness in cash prices or a very large reported build in today’s EIA report relative to expectations.”
Estimates for today’s storage report, scheduled for release at 10:30 a.m. ET, have been pointing to a build in the high 50s to low 60s Bcf range for the period ending Aug. 16.
A Bloomberg survey of 13 analysts showed a build between 50 Bcf and 68 Bcf, with a median of 56 Bcf. A Reuters poll had the same range, but a median of 60 Bcf. NGI also estimated a 60 Bcf build. Intercontinental Exchange EIA Financial Weekly Index futures settled Wednesday at a 65 Bcf injection.
That would compare with last year’s 47 Bcf injection and the five-year average of 51 Bcf, EIA data show.
The latest storage report could go a long way in deciding whether natural gas bulls can hold their ground after failing to break through resistance around $2.238 in Wednesday’s trading, according to analysts with EBW Analytics Group.
“With much cooler weather expected this weekend and a bearish forecast for the first two weeks in September, the September contract is poised for further losses, potentially testing support at $2.15...or even lower prices next week,” the EBW analysts said. “The potential for natural gas to hold its ground depends heavily on this morning’s weekly storage report.
“The consensus forecast is for an injection near 61 Bcf. Some credible estimates are even higher. A build several Bcf below the consensus forecast would be needed to trigger another move up.”
Meanwhile, Lower 48 production has fallen back to around the 90 Bcf/d mark after setting a record high at 92.3 Bcf/d Monday, according to Genscape Inc.’s estimates.
“Compared to Monday’s record high, the largest contributor to the drops has been the East, down more than 0.75 Bcf/d, with heavy concentrations of declines out of Northeast Pennsylvania,” Genscape senior natural gas analyst Rick Margolin said. “Permian production is down more than 0.6 Bcf/d versus Monday, with recent days’ estimates for the Texas portion of the Permian down to 50-day lows.
“Production in the rest of Texas is down more than 0.3 Bcf/d versus Monday. Rockies production is down 0.27 Bcf/d, primarily due to ongoing issues out of the Denver-Julesburg. Production volumes out of the Midcontinent and Gulf Coast regions are both down nearly 0.2 Bcf/d each.”
October crude oil futures were trading 43 cents higher at $56.11/bbl at around 8:30 a.m. ET, while September RBOB gasoline was up fractionally to $1.6986/gal.