Natural gas futures forged further ahead early Wednesday, supported by bargain buying and expectations for a bullish government inventory print.
Coming off a 6.8-cent gain on Tuesday, the September Nymex gas futures contract was up another 7.9 cents to $2.089/MMBtu at around 8:40 a.m. ET.
NatGasWeather noted the front month on Tuesday rallied alongside a broader upswing in equity and commodity markets, recovering from an overdone correction in previous sessions that was spurred by recession fears.
Natural gas momentum, in particular, was also “due to oversold conditions” after prices sold off nine out of the 10 sessions prior to Tuesday.
The firm also noted that production this week was holding below summer highs – the chief culprit behind the recent bearish trading trend. Output was held in check by a spate of maintenance events this week across the South Central, Rocky Mountain and Northeast regions.
Wood Mackenzie estimated natural gas production at 100.5 Bcf/d Wednesday, down from the seven-day average of 102.3 Bcf/d.
EBW Analytics Group’s Eli Rubin, senior analyst, agreed that “signs of lower natural gas production are a supportive near-term development.”
The “possibility of a second straight bullish report on Thursday could jump-start” further upside for gas futures, Rubin added.
For Thursday’s U.S. Energy Information Administration (EIA) inventory report, covering the week ended Aug. 2, NGI modeled a 30 Bcf injection. That was in line with the average of a Reuters poll and notably below the five-year average increase of 38 Bcf.
EIA reported an injection of 18 Bcf for the week ended July 26. It was far lower than the five-year average build of 33 Bcf.
Still, that print left inventories at 3,249 Bcf, or at a 16% surplus relative to the five-year average.
“There's still plenty to the bearish side, highlighted by massive surpluses in supplies that have decreased at a slower pace than expected,” NatGasWeather said. “There have also been cooler trends over the past week, while there's also Tropical Storm Debby bringing bearish demand destruction across the Southeast due to cooler temperatures and power outages.”
The firm noted seasonally mild high temperatures in the upper 60s and 70s taking hold over “greater portions of the Midwest, Plains, Ohio Valley and Northeast through early next week.” This could offset enduring heat “over much of the western and southern U.S.,” where “highs of upper 80s to 100s” are projected to drive “regionally strong demand.”
Former Hurricane Debby made landfall in western Florida as a Category 1 storm early Monday. It packed destructive winds and drenching rains. The storm was downgraded as it crossed over Florida to the Southeast coast. But it was forecast to linger this week and threaten more flooding in Georgia and the Carolinas. It could also deliver cooler air as far north as New England, according to the National Hurricane Center.
