Channeling momentum from colder overnight forecast trends, natural gas futures bounced higher in early Thursday trading. The November Nymex contract was up 4.5 cents to $2.348/MMBtu at around 8:40 a.m. ET.
All weather models trended colder overnight, with both the Global Forecast System (GFS) and European models adding heating demand to the outlook, according to NatGasWeather.
“The GFS model has been quite aggressive with the amount of cold into the U.S. and had been the odd/cold model out” until overnight trends saw other models shift colder to close the gap, the forecaster said.
“If the European model were a little colder, the markets would likely view the setup as solidly bullish” but “should still see it as bullish regardless,” NatGasWeather said.
“How long cold can last into November is the primary question ahead of the weekend break and likely at least a few days into it. Today’s trade should be interesting to see if the natural gas markets notice the added overnight demand.” However, “any gains will have to be made despite record production and what is expected to be another massive build” from this week’s Energy Information Administration (EIA) storage report.
EBW Analytics Group said its updated forecast Thursday added 10.1 Bcf of net demand from Oct. 18 through Oct. 31, reversing a bearish shift in Wednesday’s midday weather modeling runs.
“Absent a significant bearish EIA storage surprise this morning, this increase in demand should be sufficient to push prices back above yesterday’s intra-day high,” the EBW analysts said.
The EIA report, set for release at 10:30 a.m. ET, will mark the third 100 Bcf-plus injection in the past four weeks, according to estimates. In keeping with a long-running theme this refill season, an injection in the triple digits would also comfortably top both the year-ago 82 Bcf build and the five-year average 81 Bcf for the week.
A Bloomberg survey produced a median 108 Bcf estimate for this week’s report, which covers the period ended Oct. 11. Estimates ranged from 101 Bcf up to 117 Bcf. Intercontinental Exchange EIA Financial Weekly Index futures settled Wednesday at 108 Bcf. NGI’s model predicted an injection of 115 Bcf.
“It was warmer than normal over the southern U.S. and much of the Great Lakes and East, while cool versus normal over the West and Plains” during this week’s report period, NatGasWeather said. “Our algorithm expects around 110 Bcf, slightly bearish versus expectations.”
November crude oil futures were trading at $53.11/bbl at around 8:40 a.m. ET, off 25 cents, while November RBOB gasoline was trading around $1.6053/gal, down about 2.0 cents.