Ahead of the release of updated government inventory data, natural gas futures were down several cents in early trading Thursday as concerns over limited storage capacity into the end of the injection season appeared to overshadow any uplift from the recent strengthening in export demand. The October Nymex contract was down 6.0 cents to $2.346/MMBtu at around 8:40 a.m. ET.
NGI’s U.S. LNG Export Tracker for Wednesday showed feed gas flows to domestic liquefied natural gas (LNG) terminals surging to 6.35 million Dth/d, well above volumes in the 3-4 million Dth/d range recorded last week.
Analysts were expecting the recent LNG demand gains to continue, with Bespoke Weather Services gauging feed gas flows for Thursday at 6.8 Bcf/d.
“Cash prices were much weaker yesterday compared to the day before, so the market may be wary of a repeat today,” Bespoke said in a note to clients early Thursday.
Market estimates pointing to a potentially plump build for this week’s Energy Information Administration (EIA) storage report “could also be playing a role in the selling,” the firm said.
For the latest EIA report, scheduled for 10:30 a.m. ET, a Bloomberg survey found estimates ranging from 60 Bcf to 73 Bcf, with a median of 68 Bcf, while a Reuters poll found estimates ranging from 62 Bcf to 73 Bcf and a median of 69 Bcf. NGI estimated an injection of 71 Bcf for the upcoming report, which covers the week ended Sept. 4.
EIA last year recorded an 80 Bcf build for the similar week, and the five-year average is an injection of 68 Bcf. EIA reported a 35 Bcf injected into storage for the week ended Aug. 28.
“Storage remains at record levels in some regions, so the higher LNG volumes will need to sustain themselves to steer us clear of a containment scenario, something that gets even more dicey if weather continues to look tame,” Bespoke said.
For this week’s storage report period, the West, South and East regions of the United States saw “warm to hot” temperatures, while conditions in the Midwest were “comfortable,” according to NatGasWeather.
As for overnight changes to the temperature outlook, the forecaster said the major models advertised relatively minor adjustments in terms of total degree days compared to Wednesday’s outlook.
The pattern early Thursday continued to look “rather bearish overall” for the United States starting this weekend and continuing through Sept. 23. “With highs of upper 60s to 80s ruling most regions, besides locally hotter temperatures across the southern U.S., national demand will be light” and result in “larger builds lining up numerous weeks deep, ensuring end of season supplies exceed a healthy 4 Tcf.”
As of Aug. 28, U.S. gas stocks stood at 3,455 Bcf, 538 Bcf above year-ago levels and 407 Bcf higher than the five-year average, according to EIA.
October crude oil futures were off 54 cents to $37.51/bbl at around 8:40 a.m. ET, while October RBOB gasoline was off fractionally to $1.1175/gal.
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