Forexpros –
Forexpros – Natural gas futures firmed during U.S. afternoon trade Tuesday, despite the National Hurricane Center reporting Tropical Storm Debby mostly avoided the Gulf of Mexico’s energy-producing area.
On the New York Mercantile Exchange, natural gas futures for delivery in July traded at USD2.772 per million British thermal units during U.S. afternoon trade, climbing 1.39%.
It earlier rose by as much as 2% to trade at a session high of USD2.717 per million British thermal units. The July contract is due to expire at the end of trading on Wednesday, June 27.
Meanwhile, the more actively traded contract for August delivery declined 1% to trade at USD2.707 per million British thermal units. The August contract rose by as much as 1.9% earlier to trade at a session high of USD2.760.
Natural gas prices were higher earlier in the day as market players continued to monitor the path of Tropical Storm Debby as it hovered in the Gulf of Mexico.
But prices turned lower after the National Hurricane Center said Tropical Storm Debby will move over northern Florida in a day or two before weakening to a depression and re-emerging later this week in the Atlantic.
Traders expect most drilling rigs to return to production in the near-term after the storm shut 34.8% of the Gulf’s gas output as of Monday.
Prices were well-supported in recent sessions as weather forecasters initially predicted the storm would pass through the heart of the U.S. Gulf’s energy- producing area.
Energy traders track tropical storm activity in the event it disrupts production in the Gulf of Mexico, which is home to 7% of U.S. natural gas production.
The Atlantic hurricane season runs from June 1 through November 30. Prices usually gain when severe storms threaten production in the region.
Meanwhile, prices found some support from forecasts showing warmer-than-normal weather across most parts of the U.S. in the coming ten days.
The U.S. National Weather Service’s six- to 10-day outlook issued on Sunday called for above-normal readings for most of the U.S., with below-normal readings only along the West Coast.
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.
Natural gas prices are up nearly 30% 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.
Market analysts have warned that without strong demand through the rest of the summer, gas inventories will reach the limits of available capacity later this year.
U.S. gas inventories did not hit the milestone 3 trillion cubic feet level until August 31 of last year.
The storage surplus to last year will have to be cut by at least another 435 billion cubic feet 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 40 billion cubic feet to 55 billion cubic feet, compared to last year’s build of 84 billion cubic feet. The five-year average change for the week is an increase of 85 billion cubic feet.
Elsewhere on the NYMEX, light sweet crude oil futures for delivery in August shed 0.25% to trade at USD79.01 a barrel, while heating oil for August delivery added 0.85% to trade at USD2.556 per gallon.
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