Natural gas futures pulled back slightly in early trading Thursday as traders awaited the latest government inventory data, although analysts saw potential for an advance to the $4 mark in the near future. The August Nymex contract was off 2.9 cents to $3.930/MMBtu at around 8:50 a.m. ET.
For the latest weekly Energy Information Administration (EIA) storage report, scheduled for release at 10:30 a.m. ET, major surveys have been foreshadowing a net injection into Lower 48 gas stocks in the mid-40s Bcf.
Reuters’ poll of analysts produced estimates spanning builds of 30 Bcf to 60 Bcf, with a median injection of 45 Bcf. A Bloomberg poll landed at a median injection of 43 Bcf, with estimates ranging from 30 Bcf to 48 Bcf.
NGI’s model predicted a 30 Bcf injection for the upcoming report, which covers changes during the week ended July 16. In the year-ago period EIA recorded a 38 Bcf build, while the five-year average injection is 36 Bcf.
“It was hotter than normal over the West and Mid-Atlantic Coast, while warm, wet and humid elsewhere,” NatGasWeather said of conditions during this week’s EIA report period. “We expect a build of 40 Bcf, a touch to the bullish side.”
A test of resistance at $4.00 is possible for natural gas futures, but the market is likely waiting for the release of the latest storage data and for more clarity on forecasts for early August, according to analysts at EBW Analytics Group.
“A build in the mid- to low-40s Bcf could trigger a test of resistance at $4.00,” the EBW analysts said. “With very hot weather expected next week,” a slightly higher print could still see futures “hold on to most recent gains. To trigger a major sell-off, a blow-out build above 50 Bcf might be required.”
As for the latest forecasts, the major weather models advertised little change to the outlook overnight, according to NatGasWeather.
It’s late this weekend into next week “when national demand surges to much stronger levels” as a “hot ridge over the west-central U.S. expands eastward to cover most of the U.S. with highs of 90s besides the cooler Northeast and Northwest corners,” NatGasWeather said. “However, the overnight data also held the notion that national demand will ease to seasonal levels Aug. 3-6 as weather systems over southern Canada push more aggressively into the northern U.S.”
In order to keep weather sentiment bullish, the data will need to show widespread heat holding during the Aug. 3-6 timeframe, according to the firm.
September crude oil futures were up 6 cents to $70.36/bbl at around 8:50 a.m. ET.
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