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Natural Gas Futures Hover Near Even as EIA Report Seen as ‘Important Test’

Natural gas futures hovered close to even early Thursday as market participants, already on edge over storage adequacy concerns ahead of winter, awaited the latest government inventory report. A wider trading range after hours foretold volatility to come, according to analysts.

NGI Morning Natural Gas Price & Markets Coverage

The October Nymex contract was up 1.2 cents to $4.627/MMBtu as of around 8:45 a.m. ET.

Ahead of the latest Energy Information Administration (EIA) storage report, scheduled for 10:30 a.m. ET, surveys have been pointing to a below-average build in the mid 20s Bcf.

A Bloomberg survey found injection estimates ranging from 22 Bcf to 29 Bcf, with a median of 25 Bcf. A Reuters poll produced the same median figure and found estimates spanning from a build of 19 Bcf to an increase of 34 Bcf. A Wall Street Journal poll landed at an average injection of 25 Bcf, with estimates ranging from 19 Bcf to 33 Bcf.

NGI modeled a 28 Bcf injection for the EIA report, which covers net changes to Lower 48 gas stocks during the week ended Aug. 27. Last year, EIA recorded a 36 Bcf build for the period. The five-year average increase is 53 Bcf.

“This morning’s storage report will be an important test for the market,” EBW Analytics Group analysts said in a note to clients. “Most forecasts are for an injection between 19 and 26 Bcf. A print near the low end could send gas prices even higher. A build above the top end of the range most likely would trigger a retreat.”

A bearish print from the EIA report could present the “last chance” for Nymex futures to return to the $4.00 level, according to the firm.

“Production is unlikely to be restored anytime soon,” the EBW analysts said. “While a pullback undoubtedly will occur at some point, after recent steep gains, if this morning’s report is supportive, the October contract is unlikely to break support at $4.22-4.24 in the next few weeks.”

Recent natural gas price action has taken on “winter-like volatility” as the market has “a host of issues to deal with,” according to Bespoke Weather Services.

“Both supply and demand are still being impacted in the wake of Hurricane Ida, with production under 90 Bcf/d, and of course many areas in southeastern Louisiana still without power,” Bespoke.

How the impacts from Ida resolve will influence supply/demand balances in the near-term, but this amounts to “splitting hairs when considering the overall picture, as the fact remains that we are pointed toward under 3.5 Tcf for end-of-season storage levels, barring a big surprise in today’s EIA storage number,” Bespoke said.

The firm said it expects “very volatile price action” to continue for now, with risk ultimately skewed higher “until we see notable gains in production.”

October Nymex crude oil futures were up 51 cents to $69.10/bbl at around 8:45 a.m. ET.

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