Natural gas expected to rise next week

Natural gas futures are expected to rise next week amid above-normal temperatures in the Midwest U.S., according to a Bloomberg survey of analysts.

On the New York Mercantile Exchange, natural gas for delivery in September fell to $3.523 per million British thermal units at 12:22 GMT, down 0.63% on the day. Prices ranged between days high and low of $3.560 and $3.519 per mBtu respectively. The fuel surged 2.6% on Thursday but trimmed its weekly advance to 4.5% following todays losses.

Natural gas was supported throughout the week and is expected to extend its gains next weeks as weather forecasting models keep pointing at above-normal temperatures in key consuming areas. According to Commodity Weather Group LLC in Bethesda, Maryland, the Midwest may see temperatures near the highest level of the year in the next seven days. Gas prices have risen 2.9% so far in August.

Dominick Chirichella, senior partner at the Energy Management Institute in New York, said for Bloomberg: “If this weather that’s being projected actually materializes and we do get this heat wave in the next couple of weeks, we will see this trend lower in injections over that time frame. If it gets really, really hot, we could see gas pushing toward $4.”

According to AccuWeather. Inc, temperatures in Minneapolis may surge to to 94 degrees Fahrenheit on August 26, 15 above normal, while Chicagos peak may be at 90 degrees, 10 above average. Manhattan may see highs at 91 degrees on August 30, 11 above the usual.

When higher-than-normal temperatures are 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. According to the Energy Information Administration, power generation accounts for 32% of U.S. gas demand.

The fuel was well supported yesterday following EIAs bullish inventories report. Natural gas storage increased by 57 billion cubic feet in the week ending August 16, compared to last year’s and the five-year average builds at 43 billion and 56 billion cubic feet respectively. The rise was well below market projections for a 67 billion cubic feet increase according to a Bloomberg survey of analysts.

Natural gas stockpiles totaled 3 063 billion cubic feet, which remained 1.5% above the five-year average of 3 019 billion and 7.2% below last year’s 3 301 billion cubic feet of gas held in underground storage hubs.

EIA’s report also showed that inventories in the East Region added 47 billion cubic feet and were 103 billion below the five-year average, while stockpiles in the Producing Region received a 4 billion cubic feet injection and were 88 billion below the five-year of 969 billion.