Natural Gas Rises as U.S. Inventories Climb Less Than Forecast

Aug 14, 2014 3:31 pm ET

Aug. 14 (Bloomberg) -- Natural gas futures rose in New York after the government reported that U.S. stockpiles increased less than analysts predicted.

Inventories rose 78 billion cubic feet in the week ended Aug. 8 to 2.467 trillion, according to the U.S. Energy Information Administration. The median of 19 estimates compiled by Bloomberg showed a gain of 82 billion, as 18 of the analysts overestimated the size of the storage addition. The gain was the smallest since the week ended May 4 as hot weather boosted deliveries to power plants.

“The focus today is certainly on this lower-than- anticipated injection,” said Teri Viswanath, director of commodities strategy at BNP Paribas SA in New York. “Today’s miss is a power story because of the week-on-week increase in cooling-degree days for the southern states.”

Natural gas for September delivery rose 7.5 cents, or 2 percent, to $3.906 per million British thermal units on the New York Mercantile Exchange. Volume for all futures traded was 57 percent above the 100-day average at 2:46 p.m. Prices are up 17 percent from a year ago.

“With gas prices below $4 and the median price of coal at roughly $4.20 for the southeast area of the U.S., we are seeing increasing utilization of our gas generation,” Viswanath said.

Gas deliveries to U.S. power plants rose 2.3 percent to average 28.5 billion cubic feet a day during the period covered by the EIA report versus the previous week, data from LCI Energy Insight, an El Paso, Texas-based consultant, show. That is the highest weekly average since the seven days ended Sept. 13.

Winter Supplies

Stockpiles will peak at 3.463 trillion cubic feet by the end of October, before the peak heating-demand season starts, which would be the lowest level for the time of the year since 2008, according to the EIA.

Above-normal temperatures will sweep most of the lower 48 states from Aug. 19 through Aug. 28 following unusually cool readings this week, said MDA Weather Services in Gaithersburg, Maryland.

The high temperature in New York City on Aug. 21 will climb to 84 degrees Fahrenheit (29 Celsius), 2 above normal, after dipping today and tomorrow to 77, 6 below average, AccuWeather Inc. said on its website. Power plants account for 31 percent of U.S. gas consumption.

“Once you get past today and tomorrow you are going to have some cooling demand here,” said Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York. “That should keep a floor under prices.”

Supply Report

The stockpile increase reported today was bigger than the five-year average gain for the week of 45 billion cubic feet, topping the norm for the 17th straight week, according to EIA data. Supplies rose 70 billion the same time last year.

A deficit to the five-year average narrowed to 18.9 percent from 20.3 percent the previous week. Supplies were 17.7 percent below year-earlier inventories, compared with 18.4 percent in last week’s report.

Inventories have rebounded by 1.645 trillion since dropping to an 11-year low in March, the fastest pace of injections for the period in government data going back to 1994.

“The market is reacting solely based on this number; there’s a total disregard for the record pace of injections this season,” said Stephen Schork, president of Schork Group Inc., a consulting group in Villanova, Pennsylvania. “We are at the hottest part of the year and this is the last report of a four- week string that generally produces the four lowest injections of the summer.”