With updated forecast models projecting less demand for the next two weeks, and with traders awaiting the potential price impacts of the latest round of government inventory data, natural gas futures eased lower in early trading Thursday. The May Nymex contract was down 2.5 cents to $2.667/MMBtu at around 8:50 a.m. ET.
The Energy Information Administration (EIA) is set to release its weekly storage report at 10:30 a.m. ET, with market expectations pointing to a smaller injection than last week’s reported 61 Bcf build.
A Bloomberg survey as of early Thursday produced a median prediction of 47 Bcf based on 13 estimates ranging from 39 Bcf to 56 Bcf. Reuters polled 18 analysts, who came up with the same range of estimates but with a median increase of 49 Bcf. NGI’s model projected a 47 Bcf build.
This would compare with the 68 Bcf that was injected into storage during the same week last year and the 26 Bcf five-year average build, according to EIA.
“It was warmer than normal over the southern and eastern U.S and cooler than normal over the Northwest, Rockies and Plains” during this week’s EIA report period, NatGasWeather said. “We expect a build of 51 Bcf.”
Meanwhile, the major weather models both lost demand overnight, with the European model in particular dropping 9 total degree days from the outlook compared to Wednesday afternoon’s projections, according to NatGasWeather.
The European and American datasets both forecast “less cold air over the northern U.S. early next week through the first week of May while also predicting less heat over the southern U.S.,” the firm said. “…For bulls to convincingly reclaim $2.70 on May 2021, it might take the European model gaining demand back this afternoon, as it’s now forecasting a rather bearish pattern” from next Tuesday through May 7.
Short-covering ahead of today’s EIA report likely played a factor in the May contract recapturing some of its losses after prices probed as low as $2.666 in Wednesday’s session, according to analysts at EBW Analytics Group.
“Storage will be the key issue again today,” the analysts said. “Major surveys predict a build of 47-49 Bcf, a range with which we agree. Several well-regarded forecasters, however, are predicting an injection into storage of 53-55 Bcf.
“A 53-55 Bcf build would send gas prices tumbling to the mid-to-low $2.60s,” the EBW analysts said. “And an injection significantly below 47-49 Bcf could trigger another test of resistance near $2.75.”
June crude oil futures were up 6 cents to $61.41/bbl at around 8:50 a.m. ET, while May RBOB gasoline was off fractionally to $1.9810/gal.
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