Natural Gas Gains After Below-Forecast Inventory Increase

Natural gas posted the biggest gain in six weeks in New York after a government report showed that U.S. inventories expanded by less than forecast last week.

Stockpiles increased by 90 billion cubic feet in the week ended July 18 to 2.219 trillion, the U.S. Energy Information Administration said. Analyst estimates compiled by Bloomberg showed a gain of 96 billion, ranging from 89 billion to 104 billion. A survey of Bloomberg users predicted 93 billion. It was the 14th consecutive week of above-average stockpile additions.

“This is obviously a bearish number but the consensus has been all over the place,” said Stephen Schork, president of Schork Group Inc., a consulting group in Villanova, Pennsylvania. “We are still getting a ton of gas in the ground and this hasn’t changed anything.”

Natural gas for August delivery rose 8.5 cents, or 2.3 percent, to $3.847 per million British thermal units on the New York Mercantile Exchange, the biggest one-day percentage increase since June 12. Prices rebounded from $3.744, the lowest intraday price since Nov. 26. The volume of all futures traded was 30 percent above the 100-day average at 2:34 p.m. Gas is up 4 percent from a year ago.

The storage injection was bigger than the five-year average gain for the week of 46 billion cubic feet, according to EIA data. A deficit to the five-year average narrowed to 23.5 percent from 25.5 percent the previous week. Supplies were 20.2 percent below year-earlier inventories, compared with 22.2 percent in last week’s report.

October Supplies

The EIA estimates that even with record production, stockpiles will reach 3.431 trillion cubic feet by the end of October, which would be the lowest start to the peak heating demand season since 2008. Marketed gas production will increase 4.1 percent this year to 73.08 billion cubic feet a day, reaching an all-time high for the fourth straight year.

Gas flows into storage caverns will need to average 81 billion cubic feet in each of the next 15 weeks to reach the government’s end-of-season projection. Supply gains averaged 87 billion during the first 16 weeks.

“There’s not a lot of fundamental support for prices,” said Teri Viswanath, director of commodities strategy at BNP Paribas SA in New York. “We are in the peak cooling season and we have the emergence of fall-like weather.”

Mild weather may push prices to around $3.50 per million Btu and the possibility of this price deterioration may encourage short sellers to add gas positions now, she said.

Cold air from Canada pushing temperatures below normal around the Great Lakes over the next five days will sweep across the central and eastern states from July 29 through Aug. 2, said Commodity Weather Group LLC in Bethesda, Maryland.

Below Normal

The high in New York City on Aug. 1 will be 77 degrees Fahrenheit (25 Celsius), 7 below normal, and Houston may be 9 lower than average at 84, according to AccuWeather Inc. in State College, Pennsylvania.

“We’ve been in a pretty steady downtrend since June 16; the market is kind of in oversold territory,” said Dominick Chirichella, senior partner at the Energy Management Institute in New York.

The relative strength index, a technical indicator based on price momentum, has been trading below 30 since July 17, a level seen by some traders as a buy signal. The RSI was at 28.7 at 2:36 p.m. after dropping yesterday to 20.9, the lowest level since January 2012.

(Corrects storage flow figure in seventh paragraph.)
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