Forexpros – Natural gas futures were mildly lower during U.S. morning hours on Wednesday, pausing after two straight days of gains as traders were wary of pushing prices higher ahead of Thursday’s closely-watched U.S. government report on natural gas supplies.
On the New York Mercantile Exchange, natural gas futures for delivery in July traded at USD2.433 per million British thermal units during U.S. morning trade, shedding 0.5%.
The July contract traded in a broad range between USD2.486 per million British thermal units, the daily high and a session low of USD2.401. Prices touched a three-week low of USD2.314 on June 1.
Natural gas futures jumped more than 4.5% in the two sessions leading up to Wednesday, as prices received a lift from warmer weather forecasts expected across most parts of the U.S. in the coming week.
Industry weather group MDA said that highs in the 90’s Fahrenheit (32 Celsius) were possible in the U.S. Midwest from June 9 to June 13, with warmth spreading eastward to the coast after that.
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.
But the strong advance prompted investors to cash out of the market to lock in gains ahead of Thursday’s supply data.
Market participants were looking forward to the U.S. Energy Information Administration’s closely-watched weekly report on natural gas inventories scheduled for Thursday.
Early injection estimates for this Thursday’s storage data range from 45 billion cubic feet to 80 billion cubic feet, compared to last year’s build of 81 billion cubic feet. The five-year average change for the week is an increase of 99 billion cubic feet.
The U.S. EIA said last week that natural gas storage in the U.S. rose by 71 billion cubic feet 2.815 trillion cubic feet last week, 35% above both last year and the five-year-average level for this week.
Natural gas prices have been on the decline since touching a three-month high of USD2.820 on May 21. Technical traders attributed the downward movement to a shaky technical chart outlook, after the market failed to break above key resistance close to USD2.820 a number of times.
Despite the recent run of losses, natural gas prices are still up nearly 23% 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 rallied 2% to trade at USD86.00 a barrel, while heating oil for July delivery jumped 1.9% to trade at USD2.683 per gallon.
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