After punching through the $3/MMBtu barrier in the previous session, natural gas futures held relatively steady in early trading Thursday as the market awaited the latest round of government inventory data. The November Nymex contract was off 2.1 cents to $3.002 at around 8:40 a.m. ET.
The November contract settled at $3.023 Wednesday, marking the first time a prompt month closed above $3 since early 2019, Genscape Inc. analyst Dan Spangler noted.
“Bullishness was in part driven by colder shifts in weather forecasts,” including increased degree day expectations for the Midwest and East regions, Spangler said. Liquefied natural gas (LNG) feed gas demand “has also rebounded, with exports back above 8 Bcf/d for the first time since April. Meanwhile, production is still well below levels this time last year.”
Traders and analysts will get an updated read on the supply/demand balance at 10:30 a.m. ET when the Energy Information Administration (EIA) publishes its latest weekly storage report.
The report, covering the week ending Oct. 16, is expected to show a smaller-than-average build in the low 50s Bcf.
NGI’s model projected 52 Bcf build for the report, while other analyst estimates have ranged from 42 Bcf to 56 Bcf.
The EIA recorded a 92 Bcf injection for the same week last year, while the five-year average stands at 75 Bcf. Total working gas in storage as of Oct. 9 stood at 3,877 Bcf, 388 Bcf higher than last year at this time and 353 Bcf above the five-year average.
While futures were relatively unchanged day/day in early trading Thursday, after recent price action “that seems unlikely to last long,” according to Bespoke Weather Services.
The firm said its estimates showed LNG feed gas demand rising to 8.8 Bcf/d Thursday, with production essentially unchanged.
“As we are getting toward the beginning of November, we will be focused more on the weather trends in terms of assessing price risks,” Bespoke said. “We are seeing a little more consistency in a warmer shift after the opening days of November, which we believe is the way to lean.”
The current pattern as shown, especially in the European modeling, “would result in a strong warmer trend,” the firm said. “As such, while we remain neutral for now given that it is EIA day, we feel it is becoming more risky to be on the bullish side of the spectrum based on this expected warmer shift.”
Still, analysts at EBW Analytics Group Thursday pointed to potential significant upside for the recent rally.
“The market is on the edge of a major inflection point,” the EBW analysts said. With the Sabine Pass and Cameron LNG terminals “expected to return to normal operations soon and much colder weather coming, injections are likely to fall sharply early next week, ending storage containment concerns and driving natural gas cash prices and futures significantly higher.”
December crude oil futures were up 7 cents to $40.10 at around 8:40 a.m. ET, while November RBOB gasoline was trading fractionally higher at $1.1414/gal.
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