Natural Gas Gains First Time in 4 Days on Warmer Weather Outlook

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Natural gas futures rose for the first time in four days, rebounding from a one-month low, on speculation that warmer weather ahead for the summer months will stoke demand for the power-plant fuel.

Below-normal temperatures in parts of the Midwest and West will rise next week with most of the lower 48 states seeing seasonal readings July 14 through July 23, said Commodity Weather Group LLC. Seasonal storage injections tend to slow in late July and early August as demand from power plants peaks.

Stockpiles expanded by 91 billion cubic feet in the week ended July 3 to 2.668 trillion, the Energy Information Administration said. Analyst estimates showed an expected gain of 86 billion.

“The market’s reaction to the storage report suggests that a lot of the injection was priced in,” said Gene McGillian, senior analyst at Tradition Energy in Stamford, Connecticut. “You are probably seeing a bit of short covering. Part of the reason that the market seems to have stalled its slide is that we really have two months of summer in front of us and there are risks that the forecast might change.”

Natural gas for August delivery rose 4.1 cents, or 1.5 percent, to $2.726 per million British thermal units on the New York Mercantile Exchange. Gas fell to $2.685 on Wednesday, the lowest settlement since June 5.

August $2.50 puts were the most active options in electronic trading. They fell 1 cent to 2.2 cents on volume of 2,430 contracts at 2:48 p.m.

Supply Surplus

Last week’s supply increase was larger than the five-year average gain for the week of 75 billion cubic feet. A surplus to the average widened to 1.7 percent from 1.1 percent in the previous week’s report. Supplies were 33 percent above year-earlier levels, narrowing from 35 percent the previous week.

“It’s definitely bearish; we are still oversupplied,” said Aaron Calder, senior market analyst at Gelber & Associates in Houston. “In the short term we’ve got the pedal to the metal on the demand side and it’s not enough. We will have to get some summer heat to bail us out.”

Overnight computer models showed no substantive forecast changes “as the prevailing pattern over North America continues to stake out a middle ground with no major heat wave concerns and no significant cool outbreaks,” Matt Rogers, president of Commodity Weather Group LLC in Bethesda, Maryland, said in a note to clients.

New York

New York City’s high temperature on July 15 will be a seasonal 84 degrees Fahrenheit (29 Celsius) while Houston will be 1 degree higher than average at 93, AccuWeather Inc. said on its website. Electricity producers will account for 47 percent of U.S. gas demand in the third quarter, government data show.

Gas production will climb 5.7 percent this year to average 78.96 billion cubic feet a day as new wells come online at the Marcellus shale in the East and new pipelines reduce bottlenecks, the EIA said in its monthly short-term outlook released July 7.

Money managers have been bearish gas all year. Speculators increased net-short positions on four gas contracts by 5.2 percent in the week ended June 30, according to U.S. Commodity Futures Trading Commission data.

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