Despite colder-trending weather models, natural gas futures sold off sharply in the lead-up to the latest weekly government storage report Thursday, giving back gains from the previous session. Heading into its first day as the prompt month, the December Nymex contract was down 22.8 cents to $5.970/MMBtu at around 8:55 a.m. ET..
Surveys show the market looking for a build in the mid-80s Bcf from the latest U.S. Energy Information Administration (EIA) storage report, scheduled for 10:30 a.m. ET.
The median of 10 estimates submitted to Bloomberg as of early Thursday was 86 Bcf, with predicted injections ranging from 77 Bcf up to 94 Bcf. The same range was seen in a larger Reuters poll of 17 analysts, which also produced a median injection of 86 Bcf. The same range of projections in a Wall Street Journal survey averaged at a 85 Bcf injection.
NGI modeled a 94 Bcf increase in stocks for the upcoming report, which covers net changes during the week ended Oct. 22. Last year EIA recorded a 32 Bcf build for the similar week, and five-year average is a 62 Bcf injection.
“It was warmer than normal over most of the U.S. besides the slightly cool Mountain West and California,” NatGasWeather said of temperatures during the latest EIA report week. “We expect a build of 79 Bcf, although that’s likely a little light based on flow data.”
Recent forecasts showing stronger cold weather over the eastern United States have been supportive for prices, but on the other hand prices face downward pressure from production increases, according to analysts at EBW Analytics Group.
“Higher gas production heading into November remains likely — pipeline flows have already risen 1.5-2.0 Bcf/d week/week — and a post-final settlement hangover threatens near-term declines,” the EBW analysts said.
A surprise versus consensus expectations from EIA’s report could trigger a major market move. However, “a lack of bullish catalysts could enable the December contract to continue lower later in the day,” the analysts said. “Any weakness, however, may prove fleeting if mid-November cold continues to strengthen.”
NatGasWeather characterized the overnight guidance trends as mixed, with the American model losing demand for next week but shifting cooler for the Nov. 8-11 time frame. The European model, meanwhile, trended colder for next week and also during Nov. 8-11 period, according to the firm.
“Recent weather data has held the theme of adding demand as warmer days in the 12-15 day period trend colder as they roll into forecast days six to 11,” NatGasWeather said. After widespread mild temperatures through the weekend, “national demand will surge to strong levels next week as a rather chilly cold shot advances into the Midwest.
“…While this system has trended cooler over the Midwest/central U.S., cold air will struggle to reach the East…but this has also led to cool air lingering over the Midwest/Great Lakes a few days longer” than previously expected, the firm added.
December crude oil futures were down $1.07 to $81.59/bbl at around 8:55 a.m. ET.
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