Natural gas rose on Thursday as weather forecasts turned to above-normal temperatures in most of the U.S., thus boosting demand for the power plant fuel. Market players eyed the upcoming weekly U.S. natural gas storage report by the Energy Information Administration at 14:30 GMT.
On the New York Mercantile Exchange, natural gas for delivery in October rose by 0.24% to $3.591 per million British thermal units at 9:40 GMT. Prices held in range between days high and low of $3.603 and $3.570 per mBtu respectively. The contract slipped 0.2% on Wednesday but extended its weekly advance to 3% following Thursdays gains.
The fuel continued with its upward momentum as weather forecasts shifted and predicted warmer-than-normal weather in most of the U.S. According to Commodity Weather Group LLC in Bethesda, Maryland, temperatures across most of the United States will be above the average through September 1, followed by cooler weather through September 11. According to AccuWeather Inc., temperatures in New York will peak at 86 degrees Fahrenheit on August 31, 6 above average, while the high in Chicago will touch 89 degrees, 9 more than usual.
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. Mild temperatures have the opposite effect. According to the Energy Information Administration, power generation accounts for 32% of U.S. gas demand.
Market players will also be keeping a close watch on this weeks EIA natural gas stockpiles report, due at 14:30 GMT on Thursday. Early injection estimates for last week’s build range between 53 billion and 69 billion cubic feet, which is generally in line with the five-year average gain of 66 billion and last year’s increase by 64 billion cubic feet during the comparable week.
The fuel was well supported last week following EIA’s bullish inventories report. 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.
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