With forecasts dropping demand from the outlook overnight, and with another above-average weekly storage injection likely in the offing, natural gas futures were trading lower early Thursday. The October Nymex futures contract was down 2.7 cents to $2.525/MMBtu at around 8:40 a.m. ET.
Coming off a 2.8-cent decline for the front month in Wednesday’s trading, natural gas prices are likely to continue to slide, according to analysts with EBW Analytics Group.
“Despite mid-summer-like heat over a large part of the country and prices in the day-ahead market at Henry Hub averaging just below $2.60, natural gas began falling early in the day yesterday and was never able to reach Tuesday’s high -- a clear sign that the furious rally that began Aug. 23 is coming to an end,” EBW said.
Market expectations for the Energy Information Administration’s (EIA) 10:30 a.m. ET storage report, covering the week ended Sept. 6, have been pointing to an above-average build, a long-running theme this refill season.
A Bloomberg survey showed a median prediction for an 81 Bcf build from this week’s report based on 15 estimates ranging from 75 Bcf to 91 Bcf. A Reuters survey pointed to an 82 Bcf injection, with responses from 76 Bcf to 94 Bcf. NGI’s model predicted an 86 Bcf injection.
Last year, EIA recorded a 68 Bcf injection for the period, and the five-year average is a build of 73 Bcf.
“It was hotter than normal over most of the country besides the Midwest and Northeast” during this week’s report period, NatGasWeather said. “Our algorithm predicts a build of 84 Bcf,” but this week’s report is “tricky” to predict “due to the Labor Day holiday and impacts from Hurricane Dorian.”
EBW analysts said they favor a build slightly smaller than the consensus given the recent heat.
“Unless today’s build is several Bcf below consensus, though, yesterday’s move lower is likely to continue,” they said.
Meanwhile, weather models overnight showed a “notable drop” in cooling degree day expectations for next week, according to NatGasWeather. This is “aided by increasing coverage of clouds and showers across Florida and the southeastern U.S. from a tropical wave that’s currently tracking through the Caribbean. The pattern after next week was little changed, with high pressure shifting over the western U.S., allowing more seasonal cool shots into the northern and eastern U.S.”
As of 8 a.m. ET Thursday, a disturbance over the central and southeastern Bahamas had a 70% chance of cyclone formation over the next 48 hours, according to the National Hurricane Center (NHC).
“Conditions are becoming favorable for a tropical depression or a tropical storm to form within the next day or so as the system moves toward the northwest through the northwestern Bahamas and toward the Florida Peninsula at 5-10 mph,” the NHC said. “...This disturbance will bring heavy rainfall and gusty winds across portions of the Bahamas through Friday, especially in portions of the northwestern Bahamas affected by Hurricane Dorian.”
October crude oil futures were trading 90 cents lower at $54.85/bbl at around 8:40 a.m. ET, while October RBOB gasoline was off about 3.1 cents to $1.5388/gal.