Natural Gas Prices Up on Mixed News and Trader Sentiment

On Friday, the US Energy Information Administration released its weekly natural gas storage report, which stated that natural gas stocks increased by 78 billion cubic feet (bcf) for the week ending on June 29. Analysts and traders had expected a 75 million bcf increase, causing August futures to slip to $2.83 per million British thermal units (BTUs) from its opening value of about $2.85.

Futures had initially closed at $2.837 Thursday afternoon on production and cooling concerns, and opened higher Friday morning in advance of the report.

However, this slip was offset by projections from that for the upcoming week, demand will be higher than expected. Specifically, estimates state that the Eastern US will be cooler this weekend due to scattered rain, and then increase in temperature as a heat wave travels from the West during the week.

The forecast concluded by stating that “Overall, demand will be easing this weekend, then increasing again next week back to HIGH.”

Natural gas storage levels currently sit at 2,152 million bcf, representing a 25% decline from the 2,869 million bcf of a year before and 18.6% lower than the 5-year average of 2,645 million bcf.

Market reaction to the report was mostly subdued, with the three largest natural gas producers Exxon (XOM ) , Chesapeake (CHK ) and Southwestern Energy (SWN ) closing up 0.06%, 0.47% and 2.9% respectively. The VelocityShares 3x Leveraged Natural Gas ETF (UGAZ ) closed up 2.69%.

Typically, summer spells an increase for natural gas prices as the heat results in more need for cooling systems such as air conditioners, and thus more demand for gas. However, US natural gas production is currently at an all-time high, offsetting the seasonal effect.

August futures closed up 0.6% to $2.858 after trading as low as $2.824 and as high as $2.862.

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