Natural gas trims daily gains, mild weather in focus

Natural gas rose on Monday after settling Friday at the lowest level since February. Prices advanced as market players returned to the market for a round of bargain buying and some covered short bets. The fuel however trimmed its daily advance as weather forecasting models continued to point at mild temperatures across the lower 48 states, curbing demand.

On the New York Mercantile Exchange, natural gas for September delivery traded at $3.254 per million British thermal units at 8:48 GMT, up 0.87% on the day. The fuel retreated from a days high at $3.268 that was hit during Asian trading, while days low stood at $3.246 per Mmbtu. Futures tumbled 2.77% on Friday and closed the week 3.41% lower after declining 11.75% in the previous two five-day periods.

Natural gas fell to its lowest level since five months and a half on Thursday as the EIA reported inventories rose more than expected. The government agency said that U.S. gas stockpiles rose by 96 billion cubic feet in the week ending August 2, surpassing analysts’ expectations. Total inventories equaled 2 941 billion cubic feet, 9.2% below last year’s 3 238 billion cubic feet during the comparable week. Last week’s figure however rose 0.7% above the five-year average storage at 2 921 billion cubic feet, marking the first surplus since March.

The EIA also said that inventories in the Producing Region received a net injection of 15 billion cubic feet and were 76 billion above the five-year average of 973 billion. In the East Region, stockpiles rose by 58 billion cubic feet and were 105 billion below the five-year average.

Early injection estimates for this weeks build range between 62 billion and 77 billion cubic feet, well above last years 20 billion during the comparable week and the five-year average gain of 42 billion cubic feet.

Meanwhile, weather forecasters continued to predict mild temperatures across most key consuming areas. According to Commodity Weather Group LLC in Bethesda, Maryland, most of the lower 48 states may experience average or below-average temperatures through August 23. AccuWeather Inc. said that on August 18 New Yorks peak temperature may rise to 76 degrees Fahrenheit, 7 below normal, while the highest in Chicago may be 75 degrees Fahrenheit, 7 below average.

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.

According to a Bloomberg survey of analysts and traders, eight out of thirteen questioned, or 62%, wagered that natural gas futures will fall this week. Four analysts, or 31%, expected the fuel to remain flat and only one predicted prices will surge.