U.S. Gas Futures Post Biggest Second-Quarter Gain in 16 Years

U.S. natural gas futures posted their best second quarter performance since 2000 after a government report showed a smaller-than-forecast stockpile gain that reflected a revision to West Coast supplies.

Gas inventories rose 37 billion cubic feet after the Pacific region reclassified 5 billion from working gas, or stockpiles that can be withdrawn and sent to customers, and instead tagged it as gas needed to maintain adequate storage pressure. That made the implied flow for the week 42 billion. Analysts had predicted an increase of 45 billion. The inventory surplus narrowed for a twelfth straight week, according to the U.S. Energy Information Administration data.

Prices have surged 81 percent from a 17-year low in March as hot weather boosts demand for electricity generation, eroding the supply glut. Production disruptions from flooding in West Virginia and an explosion at an Enterprise Products Partners LP gas plant in Mississippi are also limiting supplies.

"The supply declines have been greater than anticipated by the market,” said Teri Viswanath, managing director of gas at PIRA Energy Group in New York. "The market wants to look at the winter, but there’s still enough moving parts in the injection season alone that it should pose a question at whether the arrival at the three-dollar mark is premature."

Futures for August delivery rose 6.1 cents, or 2.1 percent, to settle at $2.924 per million British thermal units at on the New York Mercantile Exchange after the release of the EIA inventory report. Gas gained 49 percent this quarter.

Temperatures may be broadly warmer than normal in the contiguous U.S. from July 10 through July 14, with the West hotter than previously expected, according to MDA Weather Services.

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