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James Hyerczyk
Natural Gas

Natural gas futures are edging higher on Wednesday shortly after the regular session. The move is erasing earlier weakness that was driven by a cooler shift in the overnight weather data. Today’s focus is likely to be on the weather and Thursday’s U.S. Energy Information Administration (EIA) weekly storage report although we could see some slight reactions to the Fed announcements and progress on the latest fiscal stimulus deal.

At 14:55 GMT, September natural gas futures are trading 1.878, up 0.014 or +0.75%.

Bespoke Weather Services Outlook

Analysts at Bespoke wrote overnight that the European model trended “materially cooler again” by lowering gas-weighted degree day expectations for next week and “showing a less favorable pattern for notable heat” to return in the following week.

“It had appeared the last couple of days that cooler momentum was coming to a halt, but that is not the case,” the forecaster said. “…Cooler weather next week makes sense given the rise in global angular momentum, marking the atmosphere’s move away from the hotter La Nina base state.”

“Our view is that this is temporary, and above-normal temperatures can regain the upper hand into the middle third of August, which may still work out, but for now, models are less adamant about this.”

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Looking Ahead….

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, reported.

Hurricane Hype

Believe it or not, I saw that an analyst said the market went up on Tuesday because of Tropical Cyclone Nine in the Atlantic Ocean that had a 90% chance of cyclone formation over the next 48 hours, according to the National Hurricane Center (NHC).

According to the NHC, “On the forecast track, the system will move near or over Puerto Rico tonight, near or over Hispaniola on Thursday, and near or over southeastern Bahamas on Friday.”

This storm is nowhere near the Gulf of Mexico and especially production facilities in Texas and Louisiana so I don’t know where this guy is getting his information. Even if it hits Florida, demand is likely to go down not up.

Keep an eye on it, but don’t react to it until there is more information available about its likely path.

Daily Forecast

Today’s reversal to the upside is primarily being fueled by the low injection estimates and position-squaring ahead of the EIA storage report. Furthermore, we have a contract expiration this week which usually causes volatility.

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

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