Natural gas rebounds after biggest drop in three weeks

Natural gas gained on Tuesday and snapped a two-day losing cycle after posting the biggest intraday decline in three weeks on Monday amid forecasts for mild weather across the Midwest and Northeast U.S.

On the New York Mercantile Exchange, natural gas for August delivery traded at $3.700 at 6:33 GMT, up 0.30% on the day. Prices ranged between days high and low of $3.724 and $3.689 per million British thermal units respectively. The fuel settled more than 1% lower on Monday, extending this weeks decline to over 1.8% after advancing little over 6.6% during the preceding three.

Natural gas hit a days 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 East will turn cooler between July 24 an July 28 with below-normal seasonal readings for some parts of the region. According to AccuWeather Inc., Chicago’s highest temperature on July 23 should be 79 degrees Fahrenheit, 5 degrees below normal, and Washington’s high may stand at 86 degrees, 2 degrees below the usual reading.

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.

Last week, 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.