Natural gas futures ended higher for the second session in a row Wednesday as buyers continued to take advantage of the lowest prices thus far this year. The October contract received the biggest boost, gaining 7.1 cents to close at $4.788. The prompt September contract followed suit, advancing 6.8 cents to finish at $4.745. At 40,761 estimated volume was light, an indication that traders are waiting on the sidelines ahead of Thursday’s storage report.
With little fresh news on which to focus their attention Wednesday, traders wasted little time in turning their attention to updated data set to be released by the Energy Information Administration Thursday morning. The common range of expectations calls for a 75-85 Bcf injection. If realized, a number of that magnitude would likely be deemed bearish as it would easily eclipse the year-ago refill of 33 Bcf as well as the five-year average of 51 Bcf. In 2001, when storage was at a similarly low level, the market managed to inject a healthy 75 Bcf.
However, even a number that exceeds the historical analogs is no guarantee that prices will drop. Last Thursday the EIA announced that 83 Bcf was added to underground stocks during the week ending July 25. Even though that figure easily surpassed the year-ago number as well as the five-year average, prices shuffled higher last Thursday.
A potentially bearish factor Thursday is the tropical storm outlook. After tracking several systems in the Atlantic and Caribbean over the past week, the National Hurricane Center is now monitoring only one storm — a disorganized tropical wave in the northeastern Caribbean Sea that has little chance of development.
Mild temperatures also continue to favor the bears. According to the latest six- to 10-day forecast released Wednesday by the National Weather Service, below-normal temperatures are expected to continue over the populous southeastern quarter of the country as well as across much of the West. Only a sliver of the northern tier of the U.S. from North Dakota to Maine and the desert Southwest are expected to see above normal mercury readings.
On the supply side, the EIA did its part to help natural gas bears Wednesday by issuing a glowing appraisal of storage and production increases. Specifically, they said that production is on track to increase 3% in 2003 and that the chance of reaching the 3 Tcf level of gas in storage by November “now looks good” (see related story this issue).
Just about the only thing for bulls to hang their hat on in this market is the technical outlook, which improves the longer the September contract can stay above key support at $4.58-60. “Confidence in the bullish outlook will increase each day gas remains above this level,” wrote Craig Coberly of Atlanta-based GSC Energy in a note to customers Wednesday.
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