US natural gas futures inched higher by midday Wednesday as traders monitored Tropical Storm Bertha's path along the Louisiana and Texas coasts ahead of Thursday's federal storage report.
The front-month Henry Hub contract and the continuous contract both rose by 2.27% to $2.931 per million British thermal units.
Gelber & Associates estimates the US Energy Information Administration natural gas storage report on Thursday will show a 38 billion cubic foot injection into storage for the week ended July 17.
That would compare with a 23 Bcf build during the same week last year, when inventories rose less than the market's 29 Bcf consensus expectation.
A storage injection near 38 Bcf would reduce the year-over-year storage deficit to about 6 Bcf from the current 21 Bcf, extending a narrowing trend that has persisted through July. US inventories would still remain about 181 Bcf above the five-year average.
Fundamentals on Wednesday showed US dry gas production remains strong at 109.1 Bcf per day, down from a two-week high reached on Sunday, Gelber said.
On the demand side, Texas and Louisiana are experiencing dangerous heat exacerbated by Tropical Storm Bertha, with heat index temperatures possibly reaching 116 degrees Fahrenheit in southeast Texas and 115 in parts of Louisiana.
While power demand in Texas is projected to rise to a record, strong solar generation is expected to provide an ample cushion to mitigate stress on the system, Bloomberg said.
Meanwhile, Freeport LNG's ongoing maintenance outage has kept feed gas demand lower than normal and is expected to continue through late August, leaving additional natural gas in the domestic market that would otherwise have been exported.
Wednesday feedgas flows are estimated at 17.93 Bcf, compared with the 30-day moving average of 18.41 Bcf, according to the Bloomberg LNG Feedgas Model.
While Tropical Storm Bertha has weakened, traders are keeping an eye on it as the projected path on Thursday and Friday would bring the storm near most LNG export facilities along the Texas and Louisiana Gulf Coast.
The primary operational risks include power outages affecting electrically driven LNG facilities, including Freeport LNG, as well as disruptions to electrically powered compressors on pipelines serving the Gulf Coast, Gelber said.