Natural gas futures rallied on Thursday after the US government reported a smaller-than-expected build in national stockpiles. With temperatures expected to rise over the next couple of weeks, and output falling in certain pockets of the country, could natural gas prices test $6.50 again?
August natural gas futures advanced $0.572, or 10.43%, to $6.054 per million British thermal units at 14:41 GMT on Thursday on the New York Mercantile Exchange. Natural gas has been battered in recent weeks, falling more than 32% over the last month. However, after two straight winning sessions, natural gas is poised for a weekly gain of 10%.
According to the US Energy Information Administration (EIA), domestic inventories of natural gas climbed just 60 billion cubic feet in the week ending July 1, falling short of the market forecast of 74 billion cubic feet.
In total, US natural gas supplies stand at 2.311 trillion cubic feet, down 261 billion cubic feet from the same time a year ago. They are also 322 billion cubic feet below the five-year average of 2.633 trillion cubic feet.
US weather conditions were better than what experts anticipated as it was cooler than normal in vast swathes of the Plains, Midwest, and east-central US. However, it was hotter than normal in the south, west, and New England region.
Looking ahead, the weather models suggest that temperatures could spike over the next 15 days, a trend that would expand cooling demand volumes over the next two weeks.
On the supply side, new Wood Mackenzie data show that output in southwestern Pennsylvania declined by 535 million cubic feet per day amid maintenance issues.
“Day/day Lower 48 production decreased roughly 885 MMcf/d to around 94 Bcf/d, with roughly 535 MMcf/d in southwestern Pennsylvania due to the maintenance event,” Wood Mackenzie analyst Young Liu said in a note. “Overall production is down around 2.1 Bcf/d since Tuesday from numerous overlapping maintenance events.”
In other energy commodities, August West Texas Intermediate (WTI) crude oil futures soared $4.71, or 4.78%, to $103.19 per barrel. September Brent crude futures rallied $4.15, or 4.12%, to $104.85 a barrel on London’s ICE Futures exchange. August gasoline futures climbed $0.1451, or 4.48%, to $3.3817 a gallon. August heating oil futures rose $0.1811, or 5.31%, to $3.5944 per gallon.