Even as the weather and fundamentals outlooks appeared mostly unchanged day/day, natural gas futures probed higher in early trading Thursday, riding a wave of recent bullish momentum as the market prepared to digest the latest government inventory data. The September Nymex contract was up 4.0 cents to $2.231/MMBtu at around 8:45 a.m. ET.
This week’s Energy Information Administration (EIA) storage report, scheduled for 10:30 a.m. ET, is expected to shed more light on the trajectory of U.S. inventories. The EIA reported last week that stocks grew by 26 Bcf to 3,241 Bcf, which compared with year-ago inventories of 2,615 Bcf and the five-year average of 2,812 Bcf.
Analyst estimates expect the latest round of EIA data covering the week ending July 31 to show stocks growing by another 28-33 Bcf. A Bloomberg survey of analysts produced a median build of 30 Bcf, as did a Reuters survey. A Wall Street Journal poll averaged 31 Bcf. NGI projected a 30 Bcf build, which compares with last year’s 58 Bcf build and the 33 Bcf five-year average.
“It was hotter than normal over most of the country besides small portions of the West and Gulf Coast” during this week’s EIA report period, forecaster NatGasWeather said. “Our algorithm predicts a build of 28 Bcf.”
As for the overnight guidance, the European model dropped 2-3 cooling degree days (CDD) from its outlook, while the Global Forecast System added 1-2 CDD, according to NatGasWeather.
“This puts them slightly closer together but still with the European model notably hotter than the rest of the data due to it forecasting a stronger and more expansive upper ridge late this weekend through mid-August,” the forecaster said. “…For today’s trade, we look to see if September prices can hold above $2.20 before and after the EIA weekly storage report.
“Clearly the natural gas markets are making a hefty bet a much tighter balance will arrive in the fall since weekly builds have proved the balance remains quite loose, as much above normal heat/CDD” has only resulted in “builds near to slightly smaller than normal.”
Bespoke Weather Services similarly saw no major changes in the weather outlook based on the overnight guidance. Even after a cooler start to the month, total gas-weighted degree days for August are on pace to top last year’s total, the forecaster said.
Looking at the latest balance data, including production, liquefied natural gas flows and power burns, Bespoke said it saw “very little change in any of our key data points” as of early Thursday.
Along with the overnight forecast changes, “this leaves us with little clarity on where prices move here in the near term, clouded even more by the fact that it is EIA day,” Bespoke said. “…We remain bullish over the longer term and suspect the flavor of this market is one in which any dips are to be bought, given the background fundamentals heading toward the fall and winter.”
September crude oil futures were up 9 cents to $42.28/bbl at around 8:45 a.m. ET, while September RBOB gasoline was up fractionally to $1.2290/gal.
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