U.S. natural gas inventories rise more than expected

Natural gas plunged more than 2% in the early U.S. trading session after the Energy Information Administration said in its weekly report that U.S. gas stockpiles rose more than analysts expected. Losses however remained limited as forecasts for warmer-than-usual weather boosted demand prospects for the power-station fuel.

On the New York Mercantile Exchange, natural gas futures for delivery in October fell by 1.89% to $3.614 per million British thermal units. The fuel plunged by 2.2% to a days low of $3.604 per mBtu minutes after the release of the data, while days high stood at $3.718. The contract slipped 0.2% on Wednesday and trimmed its weekly advance to 0.2% following Thursdays retreat.

Natural gas made a steep fall during U.S. trading on Thursday after the EIA reported in its weekly data that U.S. natural gas inventories rose by 58 billion cubic feet in the week ending August 30, surpassing analysts expectations. Early injection estimates ranged between 45 billion and 53 billion cubic feet. According to a survey of analysts by Platts, the energy information arm of McGraw-Hill Cos., stockpiles were projected to rise by 53 billion to 57 billion cubic feet. During the comparable week last year, natural gas stockpiles rose by 33 billion cubic feet.

Last weeks build brought the total amount of natural gas held in underground U.S. storage hubs to 3 188 billion cubic feet, which was 6.2% below last years 3 398 billion inventories. The surplus above the five-year average of 3.145 trillion cubic feet was reduced to 1.4% after remaining at 1.5% for the last couple of weeks.

Gas drew support throughout the day and traded near yesterday’s 6-week high as weather forecasting models continued to predict above-normal temperatures across most of the U.S. According to MDA Weather Services, the lower 48 states will experience higher-than-average temperatures between September 9 and September 13. AccuWeather Inc. reported that the heat may peak in Chicago on September 10 at 87 degrees Fahrenheit, 9 above average, while the high in New York on September 12 may be 85 degrees, 8 above 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.