Natural gas futures traded near a one-month low on speculation that moderate July heat won’t stoke enough demand from power plants to slow supply gains.
Above-normal temperatures in the U.S. Southeast will fade over the next week and readings will be mostly seasonal in the central and eastern states July 14 through July 23, said Commodity Weather Group LLC. A government report scheduled for release at 10:30 a.m. will probably show gas stockpiles rose faster than normal last week, according to analyst estimates compiled by Bloomberg.
“So far we haven’t had enough hot weather to generate a rally here so the market is laying low and now we are waiting for the number to come out,” said Tom Saal, senior vice president of energy trading at FCStone Latin America LLC in Miami. “You have to look at the speculators, and they are net short, so they have been pressing the market on the downside here. We will probably see some fireworks today.”
Natural gas for August delivery rose 0.7 cent to $2.692 per million British thermal units at 9:37 a.m. on the New York Mercantile Exchange after dropping to $2.673, the lowest intraday price since June 8. Volume for all futures traded was 36 percent below the 100-day average.
Overnight computer models showed no major 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 in Bethesda, Maryland, said in a note to clients.
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.
Gas inventories probably rose by 86 billion cubic feet last week, based on the median of 20 analyst estimates compiled by Bloomberg. Estimates ranged from gains of 79 billion to 93 billion. The five-year average storage injection for the period is 75 billion.
Stockpiles totaled 2.577 trillion cubic feet on June 26, 1.1 percent above the average and 35 percent higher than year-earlier levels, according to the U.S. Energy Information Administration.
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 July 7.
Looking at the recent weekly storage gains, “these numbers should be bigger if there is all this extra shale gas running around,” Saal said.
Saal expects electricity producers to burn more gas when it trades in the $2.60s because it becomes cheaper to burn than coal in more areas. “There should be some fuel switching as prices go lower.”