Leading up to Thursday's EIA Natural gas Storage, wholesale contracts edged higher on Wednesday, regrouping after their recent string of losses as long-range forecasts showed hot and humid conditions across portions of the US. This change in weather should increase air conditioner use and, therefore, demand for natural gas from utilities to generate electricity should also rise.
Tuesday the EIA reported that it expects the US will become a net exporter of natural gas by the second half of 2017. “For the first time since 1957, the United States is on track to export more natural gas than it imports; this will occur during the second half of next year as more liquefied natural gas export capacity comes online,” said an EIA Administrator. On the other hand, net imports of natural gas are expected to decline from 2.6 Bcf/d in 2015 to 0.2 Bcf/d in 2017, EIA said.
Natural gas wholesale contracts edged slightly lower in North America trade on Thursday, despite data showing that natural gas supplies in storage in the U.S. rose more than expected last week. Natural gas for delivery in August on the New York Mercantile Exchange inched lower 1.0 cents, or 0.36%, to settle at $2.727 per million British thermal units. Natural gas prices were at around $2.744 prior to the release of the supply data.
The U.S. Energy Information Administration said in its weekly report that natural gas storage in the U.S. in the week ended July 8 rose by 64 billion cubic feet, above forecasts for an increase of 59 billion.
That compared with builds of 39 billion cubic feet in the prior week, 98 billion a year earlier and a five-year average of 77 billion cubic feet.
Total U.S. natural gas storage stood at 3.243 trillion cubic feet, 15.6% higher than levels at this time a year ago and 18.1% above the five-year average for this time of year. Unless intense summer heat boosts demand from power plants, stockpiles will test physical storage limits of 4.3 trillion cubic feet at the end of October.
Natural gas wholesale contracts are up nearly 45% since late May as expectations have grown that hot summer weather will lead to heavy demand. Natural gas use typically hits a seasonal low with spring's mild temperatures, before warmer weather increases demand for gas-fired electricity generation to power air conditioning.
7/14/2016 EIA Natural Gas Storage Report:
Working gas in storage was 3,243 Bcf as of Friday, July 8, 2016, according to EIA estimates. This represents a net increase of 64 Bcf from the previous week. Stocks were 507 Bcf higher than last year at this time and 586 Bcf above the five-year average of 2,657 Bcf. At 3,243 Bcf, total working gas is above the five-year historical range.
Analysts expected the report to show that utilities added 59 billion cubic feet of gas into storage during the week ended July 8. As of 10:32 ET, natural gas futures were trading higher by 0.9% to $2.762.
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