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September natural gas posts gains overnight as storage data eyed

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September natural gas posts gains overnight as storage data eyed

Following a finish 0.8 cent lower at $2.811/MMBtu, NYMEX September natural gas futures turned higher overnight ahead of the Thursday, Aug. 3, trading session and the midmorning release of U.S. Energy Information Administration storage data. At 7:01 a.m. ET, the contract was 2.3 cents higher at $2.834/MMBtu.

Outlooks for the storage report that will cover the review week to July 28, span widely from a build of 19 Bcf to as much as a 32-Bcf injection, while consensus formed at a 25-Bcf build to stocks for the week that saw 26% fewer cooling degree days than the same time last year, but 2.7% more than normal.

The injection's comparison will be mixed against historical averages, giving some support for the overnight gains, as a 3-Bcf withdrawal was reported for the corresponding week in 2016, while the five-year average comes in at a 44-Bcf injection.

At consensus, the build would drive the total working gas supply to 3,015 Bcf after the modest 17-Bcf injection reported for the previous week drove the supply to 2,990 Bcf.

The overall improvement to the total working gas supply given a figure within the full range of expectations would limit the market's response to a bullish miss against the five-year average.

Meanwhile, weather forecasts that continue to suggest larger storage injections in the weeks ahead could combine with a more bearish outcome from the storage data to drive sharper losses.

The latest six- to 10-day weather map from the National Weather Service shows mostly average and below-average temperatures across the eastern third of the country, mostly below-average temperatures in the central U.S. and a mix of average and above-average temperatures in the West.

Below-average temperatures dominate the map in the eight- to 14-day period, although portions of the East and West will also see some average and above-average temperatures.

Market participants are attempting to determine the impact of weather on weekly storage injections as they look ahead to the total amount of natural gas in storage at the end of injection season.

The EIA expects an end-of-October supply at 3,940 Bcf, while the American Gas Association expects a slightly smaller total close to 3.8 Tcf.

Citing an increase in demand predominantly resulting from an expected 0.5 Bcf/d increase in power-sector consumption as a result of coal-to-gas due to the low price of natural gas, Morgan Stanley analysts expect an end-of-October natural gas inventory of about 3.80 Tcf, revised down from 3.85 Tcf and below what they see as market consensus near 3.75 Tcf.

Market prices and included industry data are current as of the time of publication and are subject to change. For more detailed market data, including power, natural gas index prices, as well as forwards and futures, visit our Commodities Pages.