U.S. gas: Futures edge lLower ahead of inventory report

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Natural-gas futures pulled back Thursday ahead of a government storage report expected to show the largest weekly build in U.S. inventories so far this year.

Natural gas for June delivery recently traded 6.5 cents, or 1.5%, lower, at $4.134 a million British thermal units on the New York Mercantile Exchange.

Traders are awaiting an Energy Information Administration report expected to show 89 billion cubic feet of gas was added to U.S. storage last week, according to a Dow Jones Newswires survey, near the five-year average 91-bcf build.

The EIA is scheduled to release its storage data at 10:30 a.m. EDT.

Weekly inventory builds so far this year have came in below average because of increased power-sector gas demand. But as nuclear power plants come out of their spring maintenance cycle this month and mild spring weather limits overall electricity demand, some analysts expect the size of gas inventory builds to rise.

"Higher and more normal nuclear generation has the potential to tip the supply [and] demand balance in natural gas back toward a surplus," said Citi Futures Perspective analyst Tim Evans.

If this week's storage estimate is correct, stockpiles as of Friday would have been at 1.916 trillion cubic feet, 2% below the five-year average and 12.4% short of 2010 levels.

The market remains under pressure from the view that robust U.S. production will continue this year, quickly refilling inventories and depressing prices. The EIA said this month that it expects domestic natural-gas stockpiles to reach 3.9 tcf at the end of injection season in October, surpassing the record high of 3.84 tcf reached last year.

Futures touched three-month highs above $4.70/MMBtu in early May, but have pulled back since as mild weather curbed demand for the heating and power-plant fuel.

The benchmark gas contract has spent the last two weeks in choppy, range-bound trading as a neutral weather outlook give the market little direction. Futures ended higher Wednesday, supported by forecasts for warm weather expected to increase demand for gas to power air conditioning.

Temperatures this week should be warmer than normal from the Gulf Coast through the upper Midwest and parts of the Northeast, meteorologists with private forecaster MDA EarthSat said Thursday. The warmth is seen lingering through next weekend along the East Coast, but traders said temperate weather expected elsewhere limited the boost to gas demand.

"Significant cooling demand in the high-consumption regions still looks to be a few weeks off," Kilduff Group energy analyst Mike Fitzpatrick said in a note to clients.

Meanwhile, natural gas for next-day delivery at the benchmark Henry Hub in Louisiana recently traded at $4.10/MMBtu, according to IntercontinentalExchange, down 5 cents from Wednesday's average. Natural gas for Friday delivery at Transcontinental Zone 6 in New York traded at $4.48/MMBtu, up 4 cents from Wednesday.



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