Natural gas futures climbed to a four-week high in New York on speculation that seasonally hotter U.S. weather will spur power demand, limiting stockpile gains.
Gas rose 1.3 percent. MDA Weather Services predicted above-normal temperatures in the Northeast, South and the West Coast over the next five days. Prices dropped briefly after a government report showed an inventory gain that was the biggest in five years, exceeding analysts’ projections.
“As we get into June, cooling demand begins to pick up,” said Teri Viswanath, director of commodities strategy at BNP Paribas SA in New York. “Even with the robust stock injections, the market is concerned that we are very shortly going to pass the peak of our injection season and that isn’t going to be enough.”
Natural gas for July delivery rose 6.1 cents to $4.701 per million British thermal units on the New York Mercantile Exchange, the highest settlement since May 7. Volume for all futures traded was 4.6 percent above the 100-day average at 2:35 p.m. Prices are up 11 percent this year.
The U.S. Energy Information Administration said stockpiles expanded by 119 billion cubic feet in the seven days ended May 30 to 1.499 trillion, the biggest weekly increase since May 2009. Analyst estimates showed an expected gain of 116 billion.
The injection was bigger than the five-year average injection for the week of 93 billion cubic feet, according to the EIA, the Energy Department’s statistical arm. A deficit to the average narrowed to 37.4 percent from 40.1 percent the previous week. Supplies were 33 percent below year-earlier levels, compared with 35.2 percent in last week’s report.
“This is probably going to be the largest injection we see of the season,” said Stephen Schork, president of Schork Group Inc., a consulting group in Villanova, Pennsylvania. Bullish momentum may help push prices higher next week, he said.
Gas extended gains after the government’s midday Global Forecast System showed temperatures turning a few degrees warmer for the next 11 to 15 days in the Ohio Valley and mid-Atlantic region, said Jim Southard, meteorologist with Frontier Weather Inc. in Tulsa, Oklahoma.
While the forecast didn’t change by much, “the market is noting the warming trend in the Southeast,” said Viswnath, who predicted a gain of 119 billion cubic feet for today’s report.
Most of the lower 48 states will see seasonal readings June 10 through June 19 while Texas and the Southwest will be above average, said MDA in Gaithersburg, Maryland.
The high in Dallas on June 11 will be 97 degrees Fahrenheit (36 Celsius), 6 above normal, according to AccuWeather Inc. in State College, Pennsylvania. Washington’s reading that day will be 1 above normal at 84 degrees.
Power plants account for 31 percent of gas consumption, according to the EIA.
Record U.S. gas production will help boost inventories to 3.405 trillion cubic feet by the end of October, which would be the lowest start to the peak heating-demand season since 2008, the EIA said in its May 6 Short-Term Energy Outlook.
Reaching that level will require weekly gains averaging 90 billion cubic feet, 20 billion more than the five-year average, from April 25 through October, the EIA said. Storage injections averaged 100 billion during the first six weeks of the period.
Marketed gas output will increase 3 percent this year to an all-time high of 72.26 billion cubic feet a day as new wells come online at shale deposits such as the Marcellus in the Northeast, the EIA said in the outlook.
“The industry is asking where is this extra supply and how come we are not seeing it in storage injections,” said Tom Saal, senior vice president of energy trading at FCStone Latin America LLC in Miami.
Storage gains will need to reach 130 billion to 150 billion for inventories to get to a comfortable level going into next winter, he said. “We are not getting those yet so the market is a little bullish.”