Natural gas rebounds on heat forecasts in Texas

Natural gas rebounded off a new 5-month low on Tuesday as weather forecasters predicted higher-than-normal temperatures in Texas in the upcoming weeks, thus boosting demand for the fuel.

On the New York Mercantile Exchange, natural gas for September delivery traded at $3.327 per million British thermal units, up 0.24% on the day. Prices held in range between days high at $3.356 and low of $3.311 per Mmbtu, the lowest since February. The fuel slipped 0.19% on Monday, a ninth consecutive daily decline, extending its weekly fall to 0.6% after falling over 11.7% during the preceding two weeks.

Natural gas traded mostly higher during the European and early U.S. sessions as weather forecasting models pointed at increasing temperatures in some U.S. consuming areas. Commodity Weather Group LLC in Bethesda, Maryland, forecast above-normal temperatures across Texas through August 20. According to AccuWeather.com, the highest temperatures in Dallas on August 19 will reach 102 degrees Fahrenheit, 5 degrees above average.

Phil Flynn, a senior market analyst at Price Futures Group in Chicago, commented for Bloomberg: “The heat is giving us a little bit of a dead cat bounce. We’re getting into a significant support area and it’s going to be difficult to keep below this price level.”

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.

Market players will be focusing on this week’s EIA natural gas stockpiles report at 14:30 GMT on Thursday and any changes to the weather forecasting models.

Last week,the government agency said that during the week ending July 26, U.S. natural gas storage increased by 59 million cubic feet to 2 845 billion. This was 11.5% lower than the total amount of gas held in underground storage hubs in the same week a year earlier, which equaled 3 213 billion cubic feet. Last week’s figure was also 1.2% below the five-year average stockpiles, which stood at 2 879 billion cubic feet.

However, the government report underperformed expectations. According to a survey of analysts by Platts, the energy information arm of McGraw-Hill Cos., government statistics should have shown that natural gas inventories gained in a range between 54 billion and 58 billion cubic feet.

Elsewhere on the market, crude oil for September delivery fell to $105.29 a barrel at 14:13 GMT, down 1.19% on the day. Light, sweet crude ranged between days high and low of $107.24 and $105.28 a barrel respectively. Meanwhile on the ICE, Brent oil with the same delivery month traded at $107.69 a barrel, marking a 0.93% daily decline. Prices held in range between high and low of $109.22 and $107.64 a barrel respectively.