Forexpros –
Forexpros – Natural gas traded sharply higher Tuesday, as bottom fishing buying sent the commodity rallying from the recent lows
Market players continued to monitor weather forecasts for the rest of August to gauge the strength of future demand expectations for the fuel, as well as tropical storm activity in the Gulf of Mexico.
On the New York Mercantile Exchange, natural gas futures for delivery in September traded at USD2.825 per million British thermal units during U.S. afternoon trade, climbing 3.54%.
Natural gas futures regained strength after prices held above their 200-day moving average of USD2.727 per million British thermal units, triggering fresh buy orders amid bullish chart signals.
200-day moving averages are considered key trading levels for many investors, often serving as a floor for prices after big declines.
A bout of extreme heat across much of the U.S. over the past two months helped boost natural gas prices above the key USD3.00-level in recent weeks. Prices rallied to a 2012 high of USD3.275 per million British thermal units on July 31.
But futures have come under heavy selling pressure since the start of August, losing almost 15% after extended weather forecasts pointed to milder weather across most parts of the U.S. in the next two weeks.
Industry weather group MDA EarthSat said earlier that “seasonally cool” temperatures are expected for much of the U.S. over the next ten days, with only “minor warming trends” through the end of August.
Cooler summer temperatures reduce the need for gas-fired electricity to power air conditioning, dampening demand for natural gas.
Concerns over bloated U.S. inventory levels have also dampened the appeal of the commodity. Total U.S. gas supplies stood at 3.241 trillion cubic feet last week, 16.8% above last year’s level and 13.5% above the five-year average level for the week.
Market analysts have warned that without strong demand through the rest of the summer cooling season, gas inventories will reach the limits of available capacity later this year.
Stocks peaked last year in November at a record 3.852 trillion cubic feet.
The storage surplus to last year will have to be cut by at least another 150 billion cubic feet in the 15 weeks left before winter withdrawals begin to avoid breaching the government’s 4.1 trillion cubic feet estimate of total capacity.
Early injection estimates for this week’s storage data range from 25 billion cubic feet to 40 billion cubic feet, compared to last year’s build of 43 billion cubic feet. The five-year average change for the week is an increase of 43 billion cubic feet.
Meanwhile, the U.S. National hurricane Center said earlier that a storm system off the coast of Central America has a 20% chance of forming into tropical cyclone in the next 48 hours, while another storm in the Atlantic has a 30% chance of cyclone formation.
Production in federal waters in the Gulf of Mexico account for about 10% of natural gas output and prices typically spike when storms threaten production. The U.S. Atlantic hurricane season began on June 1 and ends November 30.
Elsewhere on the NYMEX, light sweet crude oil futures for delivery in September rose 0.5% to trade at USD93.21 a barrel, while heating oil for September delivery eased up 0.15% to trade at USD3.023 per gallon.
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