Natural gas rallies on above-normal temperatures

Natural gas futures rebounded after posting the first weekly decline in a month as weather forecasters continued to predict above-normal temperatures in key consuming areas.

On the New York Mercantile Exchange, natural gas futures for October delivery rose by 0.92% to $3.563 per million British thermal units at 11:58 GMT. Prices held in range between days high and low of $3.576 and $3.532 per mBtu respectively. The fuel fell by 1.24% on Friday and settled last week 2.11% lower, the first decline in a month, as EIAs bearish supply data on Thursday continued to weigh on sentiment.

Natural gas rebounded on Monday amid forecasts for above-average temperatures that stoked demand for the power-station fuel. MDA Weather Services in Gaithersburg, Maryland, called for moderating above-normal temperatures across the eastern and central U.S. states between September 11 and 15. 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 are looking ahead at this weeks EIA natural gas storage statistics. The fuel fell almost 3% 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 week’s 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 year’s 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.