Natural gas at 1-month high as inventories rise below expectations

Natural gas futures surged more than 2.5% on Thursday to 1-month highs as weather forecasting models continued to predict above-normal temperatures in the Midwest and the Energy Information Administration reported that last weeks U.S. natural gas inventories rose less than expected.

On the New York Mercantile Exchange, natural gas for delivery in September traded at $3.553 per million British thermal units at 14:41 GMT, up 2.67% on the day. Prices rose to $3.558 minutes after the release of the report, the highest since July 26, while days low stood at $3.452 per mBtu. The fuel surged 1.15% on Wednesday and extended its weekly advance to 5.5% following Thursdays gains.

Natural gas received an additional boost today as the Energy Information Administration reported that U.S. natural gas stockpiles rose less than analysts anticipated. Natural gas storage increased by 57 billion cubic feet in the week ending August 16, compared to last year’s and the five-year average builds at 43 billion and 56 billion cubic feet respectively. The rise was well below market projections for a 67 billion cubic feet increase according to a Bloomberg survey of analysts.

Natural gas stockpiles totaled 3 063 billion cubic feet, which remained 1.5% above the five-year average of 3 019 billion and 7.2% below last years 3 301 billion cubic feet of gas held in underground storage hubs.

EIAs report also showed that inventories in the East Region added 47 billion cubic feet and were 103 billion below the five-year average, while stockpiles in the Producing Region received a 4 billion cubic feet injection and were 88 billion below the five-year of 969 billion.

Natural was supported throughout the day and marked a third daily gain in four as forecasters continued to predict hotter-than-usual weather across key consuming areas. Commodity Weather Group LLC said temperatures in the Midwest will be above-average through September 5. AccuWeather Inc. reported temperatures in Chicago may peak at 90 degrees Fahrenheit on August 31, 10 above average, while temperatures in New York may surge to 89 degrees, 9 above normal. The high in Indianapolis may rise to 92 degrees Fahrenheit on August 31, 9 more than usual.

Tom Saal, senior vice president of energy trading at FCStone Latin America LLC in Miami, said for Bloomberg: “Power load has picked up a bit with this heat and natural gas prices have firmed up. The upside potential is going to be dependent on the weather outlook.”

When higher-than-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. According to the Energy Information Administration, power generation accounts for 32% of U.S. gas demand.