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James Hyerczyk
Natural Gas

Natural gas futures are edging lower on Thursday shortly after the regular session opening as traders await the release of a weekly government storage that is supposed to show a build below average. The news is expected to ease storage capacity concerns. Traders said a combination of intense summer heat strong cooling demand led to the prediction of a low injection.

At 12:27 GMT, September natural gas futures are trading $1.903, down $0.027 or -1.40%.

U.S. Energy Information Administration Weekly Storage Report

Natural Gas Intelligence (NGI) is reporting that Energy Aspects issued a preliminary estimate for an 18 Bcf injection for the week-ending July 24 in this week’s Energy Information Administration (EIA) storage report.

“Other predictions for Thursday’s EIA report have been pointing to an injection in the 20s Bcf range. A Bloomberg survey as of early Wednesday showed a median prediction of 23 Bcf based on six estimates ranging from 18 Bcf to 30 Bcf. NGI’s storage model predicted a build of 24 Bcf”,  Natural Gas Intelligence wrote.

The forecasts compared with a 56 Bcf build for the same week a year earlier and the five-year average injection of 33 Bcf, according to the EIA.

The averages of injection forecasts, if proven accurate, would mark the lowest weekly figure this summer and the lowest in a five-week string of sub-100 Bcf additions to gas stockpiles, NGI reported.

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Short-Term Weather Outlook

According to NatGasWeather for July 30 to August 5, “Comfortable highs of 70s to 80s continues across the Midwest and Great Lakes, while also slowly pushing into the Northeast to cool highs from 90s to 80s. Texas and the West remain hot to very hot with highs of 90s to 110s, while hot and humid over the South and Southeast with mid-90s. A cooler trending weather system with heavy showers will sweep across the Midwest and east-central U.S. this weekend and next week with highs of only 70s to lower 80s for much lighter national demand.

Tropical Storm Isaias

Tropical Storm Isaias slightly strengthened a few hours after it was officially given a name, and the windshield-wiper effect continues as the track, once again, shifted east.

On Thursday morning, the storm had winds up to 60 mph as it moved northwest, bringing heavy rainfall to Puerto Rico. As of the 5 a.m. track, the coastal parts of the Tampa Bay, Florida region are now longer within the cone of uncertainty. This means the storm is veering to the East, away from the Gulf of Mexico.

The forecast for Florida this weekend depends on how the storm interacts with Hispaniola. The new track keeps Isaias barely offshore the east coast of Florida, and then it turns it up to the Carolinas.

Daily Forecast

A lower-than-expected injection could trigger another spike to the upside on Thursday as this would drive out some of the weaker short-sellers. However, the forecast for cooler temperatures is likely to prevent the rally from gaining much traction. It fact, it may even encourage some of the larger sellers to implement new positions.

Hurricane Isaias should still be monitored, but it looks like its curving East toward the Atlantic Ocean. This would take it away from production facilities in the Northern Gulf of Mexico near Louisiana and Texas. This would discourage bulls from taking speculative long positions.

Meanwhile, natural gas prices could actually fall along with demand if the storm causes power outages across Florida. No power, no air conditioning, no demand. That could be bearish for prices.

A dramatic shift to the West that puts it well into the Gulf of Mexico could develop into something bullish, but right now that’s not how it looks.

For a look at all of today’s economic events, check out our economic calendar.

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