November natural gas futures were trading 3.7 cents higher at $3.203/MMBtu shortly before 9 a.m. ET, with upcoming government storage data potentially determining the next move for a volatile market as bears and bulls wrestle for control.
Estimates for Thursday’s Energy Information Administration (EIA) weekly storage report have been wide ranging, although most projections clustered around an injection in the low 50s Bcf. A Reuters poll of 18 market participants had a range of 39 Bcf to 65 Bcf, and a median build of 51 Bcf. The year-ago build was 63 Bcf, and the five-year average is 77 Bcf for the corresponding period.
A Bloomberg survey of 14 market participants had a range of 39 Bcf to 66 Bcf, with a median build of 51 Bcf. Kyle Cooper of IAF Advisors called for a 58 Bcf injection, while EBW Analytics Group projected a 43 Bcf injection.
Last week, the EIA reported an 81 Bcf injection in storage inventories, which lifted gas stocks to 3,037 Bcf, 601 Bcf below year-ago levels and 605 Bcf below the five-year average.
“It was colder than normal across much of the country besides the Southeast and West Coast” during this week’s storage report period, with heating degree days running “considerably higher than normal,” according to NatGasWeather. “Our analysis suggests a build of 48 Bcf, under surveys, but with tricky accounting challenges for lower confidence.”
As for the overnight guidance, NatGasWeather said the data continued to show mild conditions for much of the country during the first week of November, outside of some cold in the central United States and Midwest, resulting in below normal national heating demand.
“What’s at issue is any truly cold air is likely to remain bottled up over Canada Nov. 6-10, leading to much of the U.S. being mild for this time of the year, thereby providing the first opportunity in quite some time for deficits to improve, albeit only marginally,” the firm said. “The second week of November is now critical and where the weather data is mixed between mild and cold solutions, but with the cold camp failing to gain additional momentum.
“But again, bigger picture, the background state remains solidly bullish until deficits significantly improve,” NatGasWeather said. “November prices have traded in the range of $3.10-3.35 for all of October as bulls and bears struggle for control. How prices react after today’s report, regardless of the outcome, is likely to show if the bull or bear camp can gain momentum going into the weekend close.”
The recent pattern of back and forth price swings that has characterized the futures market is poised to continue Thursday, according to EBW CEO Andy Weissman. He attributed the recent volatility in part to daily swings in the weather reports and fluctuations in pipeline scrape data.
“More fundamentally, however, the market is poised on a knife head,” he said. “Continued sky-high weather-driven demand in recent weeks has reduced projected end-of-winter storage to just over 1,250 Bcf. The market is willing to tolerate this level, but no less. Another round of very cold weather, which would further reduce inventories, could push prices to new highs.
“But warm weather, which would reduce the storage deficit, would have the opposite effect. It is not clear any resolution will occur soon.”
Shortly before 9 a.m. ET, December crude oil was trading 45 cents higher at $67.27/bbl, while November RBOB gasoline was down fractionally to $1.8210/gal.
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