With the market shifting its attention to upcoming government storage data, and with continued bearishness in the weather outlook, natural gas futures were trading slightly lower early Thursday. The April Nymex contract was off 0.8 cents to $1.819/MMBtu at around 8:40 a.m. ET.
Estimates have been pointing to a near-average withdrawal for this week’s Energy Information Administration (EIA) storage report, which is scheduled for 10:30 a.m. ET.
A Reuters poll settled on a withdrawal of 108 Bcf, while a Wall Street Journal survey landed on a 109 Bcf pull. Estimates submitted to Bloomberg showed a median withdrawal of 110 Bcf. Across the surveys, expectations ranged from a pull of 88 Bcf up to a withdrawal of 117 Bcf for the report, which covers the week ended Feb. 28. NGI’s model predicted a 106 Bcf withdrawal.
Last year, EIA recorded a 152 Bcf withdrawal for the similar week, and the five-year average is a pull of 106 Bcf.
“It was warmer than normal over the West Coast and northern U.S., while cooler than normal over the southern U.S.” during this week’s EIA report period, according to NatGasWeather. “Our algorithm predicts a draw of 109-110 Bcf, close to expectations.”
Genscape Inc. predicted a 108 Bcf pull, which would be tight versus the five-year average by around 1.4 Bcf/d when adjusting for weather, according to the firm.
EBW Analytics Group analysts estimated a withdrawal of 112 Bcf, at the high end of consensus.
“A substantially smaller draw could trigger a sell-off,” they said.
As for the overnight guidance, the American dataset dropped close to 15 heating degree days from its projections, while the European model saw a slight increase in heating demand, NatGasWeather said.
“Both are far from cold enough as any meaningful subfreezing air retreats into Canada, where only the far northern U.S. has any chance of tapping into it,” the forecaster said. “Essentially, highs of 40s to 80s will rule most of the U.S. the next 15 days, likely warm enough to drop weekly draws to under 50 Bcf after next week’s EIA storage report.
“This sets up end of winter season supplies at just over 1,900 Bcf, a hefty carryout.”
Given an “extremely bearish” weather outlook, EBW analysts characterized this week’s gains as a “relief rally.” That rally could be nearing its end, they said, citing weather modeling from DTN showing further warmer trends for the March 13-19 period.
If DTN forecasts for unseasonably warm conditions well into the back half of March come to fruition, “the withdrawal season could end soon, with the last significant draw reported next week.,” they said. “End-of-season storage could remain well above 2,000 Bcf, creating renewed downward price pressure on gas, with the year/year storage surplus soaring past 900 Bcf later this month.”
April crude oil futures were down 17 cents to $46.61/bbl at around 8:40 a.m. ET, while April RBOB gasoline was down fractionally to $1.5540/gal.