September natural gas was set to open a penny lower Wednesday as forecasts shift cooler and the market struggles to build on last week’s gains. Overnight oil markets crept higher.
Just as bulls are pinning their hopes on some late-season cooling demand in the back half of August, forecasts appeared to trend cooler overnight.
“Forecast changes were in the cooler direction and focused from the Midwest to the East in the second half of the period,” MDA Weather Services said in a morning six- to 10-day outlook. “This comes in result of high pressure dropping southward from Canada and into the region, behind a stronger eastern Canada low earlier on.
“Some of these changes are also tied to tropical activity in the Atlantic; but given poor model handling with these disturbances, the changes in the forecast were smaller than model trends since yesterday during this timeframe.”
Meanwhile, estimates show the Energy Information Administration’s storage report Thursday coming in closer to the five-year average and higher than the lean builds of the last couple weeks.
After testing the psychological $3 mark following a bullish 28 Bcf build last week, September natural gas has retreated the last few days.
Observing a “somewhat weaker” market Tuesday, Citi Futures’ Tim Evans in a note to clients pointed to less supportive weather as “expectations for Thursday’s…storage report have also bumped higher, with consensus now running closer to 50 Bcf in net injections, up from 45 Bcf or so a day ago. The five-year average for the week ended Aug. 11 was 60 Bcf, and so the market is anticipating a neutral comparison.
“Our week-to-week model points to a smaller 35 Bcf gain, and so we see some risk of a bullish surprise.”
Stephen Smith Energy, in its Weekly Gas Outlook, revised its storage estimate upward on Tuesday to call for a build of 48 Bcf, up from 46 Bcf forecast earlier in the week.
September crude oil was set to open 7 cents higher at $47.62/bbl, while September RBOB Gasoline was up slightly in overnight trading at $1.5831/gallon.
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