Natural gas little changed ahead of EIA data

Natural gas futures marked a minor daily advance on Wednesday as market players weighed forecasts for above-normal temperatures against expectations that the EIA will report U.S. stockpiles rose more than the five-year average last week.

On the New York Mercantile Exchange, natural gas futures for delivery in October gained 0.14% to $3.589 per million British thermal units at 9:22 GMT. Prices rose to a session high of $3.602 per mBtu in the early European session, while days low stood at $3.567 per mBtu. The power-plant fuel fell by 0.55% on Tuesday after surging 2.3% on Monday and trimmed its weekly advance to 1.6%.

Futures rose on Monday as weather forecasts continued to show that warmer-than-average weather will keep stoking demand for the power-station fuel. Prices fell on Tuesday as investors locked in gains amid expectations that the EIA will report a larger-than-average increase in stockpiles on Thursday. According to a Bloomberg survey of six analysts, U.S. natural gas inventories probably increased by 65 billion cubic feet in the week ended September 6, above the five-year average build of 62 billion cubic feet.

Phil Flynn, a senior market analyst at Price Futures Group in Chicago, said for Bloomberg: “The storage injection possibly coming in above average is putting pressure on the market. We had a little bit of a drop in demand last week and inventories are starting to catch up.”

Last Thursday, the fuel plunged 3% after the Energy Information Administration reported that U.S. natural gas inventories rose by 58 billion cubic feet in the week ended August 30, surpassing analysts’ expectations. According to a survey of analysts by Platts, the energy information arm of McGraw-Hill Cos., stockpiles were projected to rise by 53 billion to 57 billion cubic feet.

Losses however remained limited and a rebound followed on Wednesday on outlook for warm weather. DTN reported yesterday that temperatures in the Midwest remain above or well-above normal in the Midwest and that no cold weather threats for the region are expected in the next 10 to 15 days. When warmer-than-normal weather is expected, natural gas surges as increased electricity demand to power air-conditioning calls for more supply of the fuel, which is used for a quarter of the U.S. electricity generation. Mild temperatures have the opposite effect. According to the Energy Information Administration, power generation accounts for 32% of U.S. gas demand.

Meanwhile, investors remained edgy as the U.S. National Hurricane Center said that the tropical storm Humberto could become a hurricane by Wednesday, though its expected to remain in the eastern Atlantic. However, an area of thunderstorms and showers in the northwestern Caribbean Sea was reported moving toward the Bay of Campeche and had a 70% chance to become a tropical cyclone within five days. Such events threaten supply and push prices as the Gulf is expected to account for 5.7% of total U.S. natural gas output this year, according to the Energy Information Administration.