Forexpros –
Forexpros – Natural gas futures were higher during U.S. morning trade on Tuesday, as the previous day’s 3.5% plunge to a six-week low created bargain buying opportunities for investors.
Forecasts for warmer weather across key parts of the U.S. through mid-June provided further support.
On the New York Mercantile Exchange, natural gas futures for delivery in July traded at USD2.236 per million British thermal units during U.S. morning trade, climbing 0.79%.
It earlier fell by as much as 1.7% to trade at USD2.174 per million British thermal units, the lowest since April 30.
Natural gas prices plunged 3.5% on Monday as last week’s bearish supply report renewed concerns about the massive domestic supply glut.
Total U.S. natural gas inventories stood at 2.877 trillion cubic feet as of last week, the highest ever for this time of year and 33% above the five-year average.
The larger-than-expected increase raised concerns over where excess gas will be stored later this year. The storage surplus to last year will have to be cut by at least another 465 billion cubic feet to avoid breaching the government’s 4.1-trillion cubic feet estimate of capacity.
Early injection estimates for this week’s storage data range from 64 billion cubic feet to 80 billion cubic feet, compared to last year’s build of 72 billion cubic feet. The five-year average change for the week is an increase of 88 billion cubic feet.
But prices regained strength as investors returned to the market to seek cheap valuations while some short-covering and forecasts for warm weather also provided a boost.
The U.S. National Weather Service’s six- to 10-day outlook issued on Monday called for above-normal readings for much of the eastern half of the nation.
Warmer-than-normal temperatures increase the need for gas-fired electricity to power air conditioning, boosting demand for natural gas. Natural gas accounts for about a quarter of U.S. electricity generation.
Prices have been on the decline since touching a three-month high of USD2.820 on May 21. Despite the recent run of losses, natural gas prices are still up 15% since touching a decade-low of USD1.902 on April 19, amid indications major North American natural gas producers were cutting back on production.
Speculation that utility providers in the U.S. were switching from pricier coal to cheaper natural gas provided further support over recent weeks. However, market players noted that sustained prices back above USD2.50 and toward the USD3.00-level likely would inspire some switching back to coal.
Elsewhere on the NYMEX, light sweet crude oil futures for delivery in July eased up 0.1% to trade at USD82.80 a barrel, while heating oil for July delivery added 0.1% to trade at USD2.637 per gallon.
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