Natural gas futures are slightly higher on Thursday shortly after the regular session opens and ahead of the release of the government’s latest weekly storage report at 2:30 p.m. GMT. Early price action floated the market just below the multi-week high reached in the previous session.
Favorable weather forecasts, lower production and potentially low storage ahead of the winter heating season are three reasons for the current bullish outlook.
However, early Thursday some of the steam was pulled from the market after overnight weather patterns showed a little less heat in mid-August. Natural gas traders are also a little nervous ahead of the government report due to lack of clarity on the size of the expected injection. These two factors could prove to be the recipe for increased volatility.
At 1:47 p.m. GMT, September natural gas futures are trading at $ 4.186, up 0.028 or + 0.65%. This is a rise from an intraday low of $ 4,116.
Night weather forecast shows a little less heat
Despite losing 2-3 cooling degree days from the long-term outlook, next week is still expected to bring the hottest weather of summer. However, the stifling outlook for the eastern half of the country is now expected to ease a bit by August 16, Natural Gas Intelligence (NGI) reported.
NatGasWeather said August 5-11, “Domestic demand will be moderate through Friday as a cold snap persists in the Great Lakes and northeastern United States with highs of 70 to 80. The West , Texas and the Plains will be very hot to hot with highs ranging from the 80s to 110 as high pressure rules, the hottest in California and the Southwest.
Temperatures will rise in the east this weekend and next week as strong upper pressure will bring highs of 90, while also being warm with mid-90s highs to 100 over Texas and the south for a high to very high national demand.
Overall, moderate domestic demand through Friday, then rising to high this weekend and high to very high next week. “
Energy Information Administration weekly storage report
Prior to today’s weekly storage report, analysts and market watchers didn’t seem to have a clear idea of the size of the injection that could be reported by the Energy Information Administration (EIA), reported NGI.
According to NGI, a Wall Street Journal poll produced estimates ranging from an increase of 14 billion cubic feet to 34 billion cubic feet. Reuters polled 17 analysts, whose estimates were in the same range with a median injection of 21 billion cubic feet. A Bloomberg survey had a median injection of 18 Bcf, and NGI modeled a build of 17 Bcf.
This would be on par with the 32 Bcf infection last year and the average build of 30 Bcf over five years, according to the EIA.
With traders starting to evaluate in a less bullish weather outlook, today’s EIA report is nearing the 17-14 billion cubic feet area to push prices higher. Still, even with a bullish EIA report, traders should be prepared for a volatile downward reversal late in the session. Despite yesterday’s rally, price action does not appear to be supported by extremely strong buyers.