Gas stockpiles on the rise

Natural gas (NYMEX:NGM14) futures rose from a two-week low in New York as warmer weather may spur fuel demand from power plants to run air conditioners.

Gas rose as much as 1.1% as forecasters including Commodity Weather Group LLC in Bethesda, Maryland, predicted above-normal temperatures for the East and West coasts next week. A government report today will probably show that gas stockpiles rose by 112 billion cubic feet last week, based on the median of 22 analyst estimates compiled by Bloomberg. The five-year average increase for the period is 88 billion.

“The market is really going to be tracking the weather forecast,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “The market’s dropped nearly 25 cents from this week’s high; we are seeing a little bit of short covering before the report.”

Natural gas for July delivery rose 4.2 cents, or 0.9%, to $4.55 per million British thermal units at 9:47 a.m. on the New York Mercantile Exchange after closing yesterday at $4.508, the lowest settlement since May 27. Volume for all futures traded was 55% below the 100-day average. Gas is up 7.6% this year.

The high temperature in Washington on June 20 may be 94 degrees Fahrenheit (34 Celsius), 8 above normal, according to AccuWeather Inc. in State College, Pennsylvania. Atlanta’s reading will be 5 higher than average at 92 degrees.

Inventory Gains

Electricity generators account for 31% of gas consumption, according to the U.S. Energy Information Administration, the statistical arm of the Energy Department.

U.S. inventory gains have topped historical norms for seven straight weeks as mild weather limited demand and production increased. Supplies are hovering near 11-year seasonal lows and a record amount of gas will need to flow into storage caverns to prepare for next winter, government estimate show.

“The heat is not really on yet so injections should continue to be strong for the coming weeks, but the catch-up game is not looking that strong,” Drew Wozniak, vice president of market research at United-ICAP, a brokerage in Jersey City, New Jersey, said in a note to clients today.

The EIA is scheduled to release its weekly gas inventory report at 10:30 a.m. in Washington. Estimates ranged from increases of 101 billion to 114 billion cubic feet.

Inventories totaled 1.499 trillion in the week ended May 30, 37% below the five-year average for the period, last week’s report showed.

Copyright 2014 Bloomberg. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

comments powered by Disqus
Check out Futures Magazine - Polls on LockerDome on LockerDome