Natural gas futures bounce off 2-week low in early trade

Natural gas futures were higher during U.S. morning trade on Monday, bouncing off a two-week low as market participants continued to monitor weather forecasts to gauge the strength of early-Autumn cooling demand. On the New York Mercantile Exchange, natural gas futures for delivery in October traded at USD2.720 per million British thermal units during U.S. morning trade, jumping 1.4%. It earlier fell by as much as 1% to trade at a session low of USD2.655 per million British thermal units, the weakest level since August 29. Updated weather forecasts Sunday predicted below-normal temperatures in parts of the Midwest in the coming week and above-normal readings along both coasts. Natural gas demand typically rises in the summer as air-conditioning use boosts utility demand, then sinks in the fall as demand weakens ahead of the peak winter heating season. Also supportive was the aftermath of Hurricane Isaac, which shut much of the natural gas production in the Gulf of Mexico. Nearly 10% of gas production remained shut on Sunday, U.S. regulators said. Natural gas futures also drew support from weekly production data from industry research group Baker Hughes, which showed the number of active rigs drilling for natural gas in the U.S. fell by 21 last week to a fresh 13-year low of 452. However, any significant gains were likely to be capped amid ongoing concerns over bloated U.S. inventory levels. Total U.S. gas supplies stood at 3.402 trillion cubic feet, 13.1% above last year’s level and 10.7% above the five-year average level for the week. Inventory did not top the 3.4-trillion cubic feet level in 2011 until October 5, with stocks peaking at a record 3.852 trillion cubic feet in November of last year. 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. The storage surplus to last year will have to be cut by at least another 150 billion cubic feet in the 12 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 22 billion cubic feet to 66 billion cubic feet, compared to last year's build of 80 billion cubic feet. The five-year average change for the week is an increase of 72 billion cubic feet. 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 late-July. 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 17% after extended weather forecasts pointed to milder weather across most parts of the U.S. Elsewhere on the NYMEX, light sweet crude oil futures for delivery in October shed 0.35% to trade at USD96.07 a barrel, while heating oil for October delivery added 0.25% to trade at USD3.156 per gallon.

Courtesy: ForexPros