Natural gas futures erase daily losses after EIA inventory data

Natural gas jumped to positive daily territory after the Energy Information Administration reported that US natural gas inventories rose less than expected in the seven days through October 17th, but still scored the 27th consecutive above-average weekly build.

Natural gas futures for settlement in November rose 0.19% to $3.666 per million British thermal units by 14:36 GMT, having earlier touched a fresh 11-month low of $3.608. The energy source slid 1.4% on Wednesday to $3.659, extending its weekly decline to 3.6% so far this week.

The EIA reported that US natural gas stockpiles rose by 94 billion cubic feet (bcf) during the week ended October 17th, compared to analysts projections for a jump in the range of 95-98 bcf. Total gas held in US storage amounted to 3.393 trillion cubic feet as of last week, narrowing the gap to the five-year average of 3.731 trillion to 9.1%. Year-on-year, gas levels were 9.0% lower.

The East region received a net injection of 47 billion cubic feet and stood at 1.872 trillion, 7.1% below the five-year average, while stockpiles in the West region rose by 8 bcf to 482 billion, trailing the five-year average by 6.9%. The Producing region saw a build of 39 billion cubic feet to 1.039 trillion and was 13.4% below the average.

The Energy Information Administration said in its Short-Term Energy Outlook dated October 7th that inventories may rise to 3.532 trillion cubic feet by the end of the month, the lowest for this time of the year in six years. Marketed gas production is expected to jump 5.4% this year to 73.98 bcf per day, the biggest percentage increase and also volume since 2011.

US weather

Market players also kept a close eye on weather developments in the US.

According to NatGasWeather.com, natural gas demand over the next seven days will remain low-moderate, compared to normal, with a neutral trend for the 8-14 day outlook.

The Northeast will see showers and slightly cooler-than-usual readings today as the previously reported slow moving weather system tracks across the region, moving east. The central and eastern US will enjoy above-seasonal temperatures this weekend before additional weather systems arrive next week.

Readings over the central and southern US are also expected to be mild over the next several days, with highs into the 60s and 70s, and 80s for the South. Pacific storms across the Northwest will carry rains and slightly cooler-than-normal readings.

Next week, a weather system tracking across the north-central US will push readings below average and will track into the Northeast, followed by additional cool blasts. The central and southern parts of the country, however, will remain mild, curbing heating and cooling demand. The West will enjoy warm temperatures, while the Northwest will remain cooler and with showers.

The market has drawn support in the recent weeks amid expectations that a cold start to November will narrow weekly inventory injections and push the market up. However, how much cold Canadian air will be tapped by the predicted weather systems is still not clear, with weather data over the past 24 hours becoming less convincing.

“If weather patterns fail to bring cold temperatures throughout the firs tweek of November, we believe this would continue to provide bearish weather sentiment as three straight much larger than normal builds would line up,” NatGasWeather.com analysts said in an e-mailed note.