Natural Gas Futures Continue Higher in Early Trading as Market Awaits Storage Data

Against a backdrop of potentially bullish developments on the export front, natural gas futures extended their recent gains early Thursday as traders prepared to factor in the latest government inventory data.

After surging 36.9 cents higher in the previous session, the September Nymex contract was up another 23.7 cents to $8.439/MMBtu as of around 8:45 am ET.

Estimates ahead of the Energy Information Administration’s (EIA) 10:30 am ET storage report showed expectations focused around a net injection near 40 Bcf for the week ended Aug. 5.

Surveys by Bloomberg, Reuters and the Wall Street Journal all produced a range of injection estimates from 30 Bcf to 44 Bcf. The Bloomberg and Reuters polls each produced a median injection estimate of 40 Bcf, while the: Wall Street Journal poll averaged a 39 Bcf build.

The EIA recorded a 44 Bcf injection into storage during the same week last year, while the five-year average is a 45 Bcf build.

“It was hotter than normal over much of the western, southern and eastern US, while cool across the Midwest and Mississippi River Valley,” NatGasWeather said of temperatures during the EIA report period. “We expect a build of 42-43 Bcf, a touch to the bearish side.”

In the event of a leaner-than-expected print from EIA, there may be limited further upside given the recent rally in prices, according to EBW Analytics Group senior analyst Eli Rubin.

“While a bullish report could drive prices up towards resistance at $8.70, after the steep 75-cent gain of the past 24 hours, the majority of any move higher may have already transpired,” Rubin said.

Rubin attributed the sharp move higher in Wednesday’s session to a combination of profit-taking among traders holding short positions and news of Freeport LNG’s removal of the force majeure declaration for the incident that knocked the terminal offline earlier this summer.

“With Freeport apparently assigning blame to human error rather than a mechanical fault, it is possible that regaining federal approvals will be an easier process and increase the chances of achieving an October restart,” Rubin said.

As for overnight changes to the weather outlook, NatGasWeather observed an additional 3-4 cooling degree days (CDD) from the American model, which had been trending cooler in recent days.

“However, the European model disagreed and trended slightly cooler by 1-2 CDD,” the firm said. The European dataset “still forecasts comfortable temperatures over much of the eastern half of the US the next 15 days for only near normal national demand, including a few days below normal.”

Should prices continue to rally Thursday it would be a result of “other factors” besides weather sentiment, as the temperature outlook is “the least bullish” it has been in “quite a while,” NatGasWeather added.

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