Natural-gas futures ticked higher Friday, as traders covered bets on
lower prices a day after a bigger-than-expected increase in domestic-gas
inventories.
Natural gas for September delivery rose 0.8 cent, or 0.3%, to
recently trade at $3.395 a million British thermal units on the New York
Mercantile Exchange.
Prices often bounce back slightly after a sharp decline. On
Thursday, natural-gas futures fell to a five-month low after the U.S.
Energy Information Administration said 59 billion cubic feet of gas were
added to storage in the week ended July 26, higher than expectations.
"Some market participants took profits by covering their short
positions," said Carsten Fritsch, analyst at Commerzbank in Frankfurt.
But prices are expected to remain at depressed levels in the
absence of hurricane activity, which raises the risk of supply
disruptions, and expectations for mild weather in the summer.
Milder temperatures in the summer typically lowers demand for
natural gas, as homes and businesses curb air-conditioning use, reducing
utilities' need for gas-fired electricity. "Unless we get warmer
weather there is little chance that prices will show a strong recovery,"
Mr. Fritsch said.
Below-normal temperatures are projected to continue across
highly populated gas-consuming regions such as the Plains, Midwest and
East Coast for the next two weeks. "The forecast continues to strongly
favor persistence, keeping a cool pattern in place through most of the
Eastern half," said private forecaster MDA in its 11-15 day forecast
Friday.
Market watchers see these conditions translating into a build
in gas inventories until the end of August. "The market focus is now
largely placed on additional stronger-than-normal storage increases that
now appear assured within the next three EIA releases," Jim
Ritterbusch, head of trading advisory firm Ritterbusch & Associates,
said in a note.
Natural gas for next-day delivery at the benchmark Henry Hub
in Louisiana recently traded at $3.41/MMBtu, according to
IntercontinentalExchange, compared with Thursday's average of
$3.4355/MMBtu. Natural gas for next-day delivery at Transcontinental
Zone 6 in New York traded at $3.30/MMBtu, down from $3.3985/MMBtu.