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James Hyerczyk
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Natural Gas

Natural gas futures are trading slightly lower on Thursday shortly before the release of the U.S. government weekly storage report. The price action reflects general concern over the report, but mostly reflects a slight concern over Hurricane Delta, which is not expected to directly hit any production facilities and may even weaken before it makes landfall. Also weighing on prices were a weaker spot market. Nonetheless, volatility is likely to continue because each event does carry a little uncertainty.

At 12:06 GMT, December natural gas is trading $3.097, down 0.052 or -1.65%.

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Meanwhile, lower demand because of the coronavirus pandemic and the usual shoulder season lull in power burns have led to a much quicker-than-normal refilling of Lower 48 storage, leading to concerns over containment issues.

Total stocks at the end of September stood at more than 3.8 trillion cubic feet (Tcf), which is 12% above the five-year average, according to the Energy Information Administration (EIA). In its latest Short-Term Energy Outlook released Tuesday, the EIA said it expects inventories to swell beyond 4 Tcf by the end of October.

Short-Term Weather Outlook

There are some minor changes to the 15-day forecast, but overall the coming pattern is expected to remain rather bearish, Natural Gas Intelligence (NGI) reported.

Mobius Risk Group said recent weekly changes in wind generation being driven by transitory weather patterns are also worth noting on the weather front.

According to NatGasWeather for October 7 to October 13, “The northern US will be mostly comfortable today with highs of upper 60s and 70s, then cooling across the Great Lakes and Northeast Thursday – Saturday as a weather system sweeps through with highs of 50s and 60s, lows of 30s and 40s. The rest of the US will be warm to very warm with highs of 70s and 80s besides the hotter Southwest into California with 90s to 100s. Most of the US will be comfortable this weekend and early next week besides the Northwest and Northern Plains as weather systems bring showers and cooling. Overall, national demand will be low.”

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US Energy Information Administration Weekly Storage Report

NGI reports ahead of the EIA storage report, to be released at 14:30 GMT, analyst estimates hovered around a build in the low to mid-70s Bcf. The seven analysts surveyed by Bloomberg responded with estimates ranging from 67 Bcf to 85 Bcf, with a median of 73 Bcf. A Wall Street Journal poll had the same range but arrived at a median of 74 Bcf. A Reuters poll with the same range of projections had a median of 73 Bcf. NGI pegged the build at 75 Bcf.

Daily Forecast

Due to storage issues, the next five storage reports are likely to be eyed closely by traders as they compare the actual numbers to the EIA estimates.

If the actual EIA number comes in at low-to mid- 70, it would be far below the year-ago and five-year averages reported by the EIA. For the same week last year, the EIA recorded a 102 Bcf injection, while the average over the past five years is 86 Bcf.

With the U.S. stocks well above historical levels, a below average EIA report could provide some support for prices, but a high number could lead to a steep sell-off.

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