Natural gas futures jumped in New York, heading for the biggest one-day gain in two months, after the government reported a U.S. stockpile increase that was smaller than analysts predicted.
Inventories rose 78 billion cubic feet in the week ended Aug. 8 to 2.467 trillion, according to the U.S. Energy Information Administration. The median of 19 estimates compiled by Bloomberg showed a gain of 82 billion, as 18 of the analysts overestimated the size of the storage addition. The gain was the smallest since the week ended May 4 as hot weather boosted deliveries to power plants.
“The focus today is certainly on this lower-than-anticipated injection,” said Teri Viswanath, director of commodities strategy at BNP Paribas SA in New York. “Today’s miss is a power story because of the week-on-week increase in cooling-degree days for the southern states.”
Natural gas for September delivery rose 9.7 cents, or 2.5%, to $3.928 per million British thermal units at 11:34 a.m. on the New York Mercantile Exchange, heading for the biggest one-day percentage gain since June 12. Volume for all futures traded was 83% above the 100-day average. Prices are up 18% from a year ago.
“With gas prices below $4 and the median price of coal at roughly $4.20 for the Southeast area of the U.S., we are seeing increasing utilization of our gas generation,” Viswanath said.
Gas stockpiles will peak at 3.463 trillion cubic feet by the end of October, before the peak heating-demand season starts, which would be the lowest level for the time of the year since 2008, according to the EIA.
Above-normal temperatures will sweep most of the lower 48 states from Aug. 19 through Aug. 28 following unusually cool readings this week, said MDA Weather Services in Gaithersburg, Maryland.
The high temperature in New York City on Aug. 21 will climb to 84 degrees Fahrenheit (29 Celsius), 2 above normal, after dipping today and tomorrow to 77, 6 below average, AccuWeather Inc. said on its website. Power plants account for 31% of U.S. gas consumption.
“Once you get past today and tomorrow you are going to have some cooling demand here,” said Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York. “That should keep a floor under prices.”
The stockpile increase reported today was bigger than the five-year average gain for the week of 45 billion cubic feet, topping the norm for the 17th straight week, according to EIA data. Supplies rose 70 billion the same time last year.
A deficit to the five-year average narrowed to 18.9% from 20.3% the previous week. Supplies were 17.7% below year-earlier inventories, compared with 18.4% in last week’s report.
Inventories have rebounded by 1.645 trillion since dropping to an 11-year low in March, the fastest pace of injections for the period in government data going back to 1994.
“The market is reacting solely based on this number; there’s a total disregard for the record pace of injections this season,” said Stephen Schork, president of Schork Group Inc., a consulting group in Villanova, Pennsylvania. “We are at the hottest part of the year and this is the last report of a four-week string that generally produces the four lowest injections of the summer.”