Natural gas rallies 2%

Natural gas futures surged 2% during early U.S. trading following Mondays sell-off as investors returned to the market to seek cheap valuations.

On the New York Mercantile Exchange, natural gas for August delivery traded at $3.741 per million British thermal units, up 1.73% on the day. Prices ranged between days high at $3.762 and low of $3.660 per mBtu. The fuel settled more than 1% lower on Monday but trimmed this week’s decline to 0.8% after advancing 6.6% during the preceding three.

Natural gas hit a day’s low of $3.642 on Monday as weather forecasters pointed at cooling temperatures. According to MDA Weather Services in Gaithersburg, Maryland, temperatures across the Midwest and Northeast will turn cooler between over the next 6-to-14 days.

When above-normal temperatures are expected, natural gas surges as increased electricity demand to power air-conditioning calls for more supply of the fuel, which is used for a quarter of the U.S. electricity generation. Mild temperatures have the opposite effect.

Meanwhile, Natural Gas Storage levels remained in market playerss focus. Last Thursday, the Energy Information Administration reported natural gas stockpiles rose less than expected, which shot the fuel up more than 4% on the day. According to EIA’s weekly report, U.S. Natural Gas Storage rose by 58 billion cubic feet to 2 745 billion as of the week ending July 12. This was below market expectations for a 64 billion cubic feet gain and the five-year average 70 billion.

During the same week last year, natural gas reserves rose by 29 billion cubic feet to 3 159 billion, which was 13.1% higher than last week’s total stockpiles. The five-year average Natural Gas Storage stood at 2 779 billion cubic feet, 1.2% above the current.

Preliminary injection estimates for this weeks data range between 45 billion cubic feet and 60 billion. This is well above last years 26 billion cubic feet increase during the comparable week and also higher than the five-year average build of 53 billion cubic feet.

Elsewhere on the market, West Texas Intermediate erased partially earlier daily losses. Light, sweet crude for September delivery traded at $106.90 a barrel at 15:10 GMT, down 0.04% on the day. The American benchmark fell to a days low of $105.47 in late European trading but rebounded as the U.S. dollar plunged following several disappointing economic indicators, while Canadaian Retail Sales outperformed expectations.

Meanwhile on the ICE, Brent oil for September delivery traded at $108.51 a barrel at 15:10 GMT, up 0.33% on the day. Prices ranged between days high and low of $108.58 and $107.57 per barrel respectively. The European benchmark erased earlier weekly losses and is marking a 0.02% advance so far for the week.