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Natural gas futures prices were modestly higher Thursday morning ahead of a weekly government report on U.S. gas inventories.
Natural gas for September delivery rose 2.1 cents, or 0.7%, to recently trade at $2.768 a million British thermal units on the New York Mercantile Exchange.
The increase comes as the market looks ahead to Thursday’s report by the U.S. Energy Information Administration on how much natural gas was added in storage last week.
The EIA is expected to report that 25 billion cubic feet of gas were added to storage during the week ended Aug. 10, according to the average prediction of 16 analysts and traders in a Dow Jones Newswires survey.
That estimate falls short of last year’s 43-bcf build in storage for the same week and the 43-bcf five-year average build for that week.
Tom Saal, a broker at INTL Hencorp Futures in Miami, said predicting the level of new gas in storage has become more difficult because of the extensive switching of coal to natural gas.
“We’re kind of in a new realm of incrementally higher burn due to the coal displacement,” Mr. Saal said.
Natural gas inventories currently stand about 14% above the five-year average due to a glut of supply from new shale gas projects.
Natural gas supplies were even more abundant earlier this year, with inventories in March 60% above the five-year average. But some of the surplus has been worked off as consumers have turned to air conditioning to combat hotter-than-usual weather this summer.
Forecasters expect the temperatures to moderate in the coming period. The Commodity Weather Group is calling for “the biggest cool push since the first half of June” in the Central, Southern and Eastern U.S. in the coming days. The forecaster’s 6-to-10 day forecast calls for cooler temperatures in that region.
Cooler weather typically lowers gas demand from electric utilities, which have to produce less power as homes and businesses shut off their air conditioning.
“We’re off the highs from the last couple of weeks due to the weather moderating,” Mr. Saal said. “The weather continues to moderate and we’ll grind lower.”
The National Hurricane Center is currently tracking two storm systems, one in the Atlantic Ocean and another that is over Southeastern Mexico. Neither is currently expected to threaten natural-gas production along the coasts of Texas and Louisiana in the Gulf of Mexico.
- John Biers at Dow Jones.