U.S. gas: Futures edge higher on storage build in line with estimates

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HOUSTON (Dow Jones)--Natural-gas futures edged higher Thursday after the Energy Information Administration reported that U.S. inventories rose as expected last week and market participants weighed the impact Hurricane Irene may have on demand.

Natural gas for September delivery settled 0.9 cents, or 0.23%, higher, at $3.931 a million British thermal units on the New York Mercantile Exchange.

The benchmark contract rose as high as $3.984/MMBtu after the EIA reported that 73 billion cubic feet of gas was added to U.S. stockpiles during the week ended Aug. 19.

That build, which was nearly twice as high as last year's for the same week and well above the five-year average of 55 bcf, matched the prediction of analysts and traders surveyed by Dow Jones Newswires. It brought inventories to 2.906 trillion cubic feet as of Aug. 19, 1.9% below the five-year average and 4.6% below 2010 levels.

Tim Evans, an analyst with Citi Futures Perspective, said he "expects injections to run moderately above the five-year average pace over the next few weeks."

If that's the case, it would eliminate the storage deficit that has been prolonged this summer by demand for electricity prompted by unseasonably high temperatures in much of the country.

Though temperatures have moderated in many large power markets, private forecasters Commodity Weather Group predict a "surge in heat" in the Midwest next week.

The forecasters said, however, that any added demand to power air conditioners in Chicago could be negated by the effects of Hurricane Irene, which could knock out power in major cities such as Boston and Washington this weekend or early next week.

The National Hurricane Center's most recent models show Irene making landfall in North Carolina on Saturday and plowing up the Atlantic Coast.

"Hurricane Irene is promising for the bears as she shifts more toward land," said Pax Saunders, an analyst with Gelber & Associates in Houston. "A meaty inland strike by Irene could flush some cooling demand between lower temperatures and power interruptions."

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