Trading Outlook of Natural Gas as Temperatures ChangeBy Annie Reona | Tuesday, July 21st, 2015
On Monday, natural gas prices fell slightly, but losses stopped when temperatures began to climb higher than normal combined with a leaner inventory build. The cooler weather systems are expected to begin to move through the Northeast and US Midwest regions.
In August, natural gas traded at $2.827 per million British thermal units, a full 1.50% lower, the daily range shifting between $2.823 and $2.851. On Friday, the contract increased to $2.870 which closed the week out 3.6% higher.
NatGasWeather.com has predicted that the demand for natural gas will be higher than normal right now, but will continue to drop until Thursday and then rapidly increase again. This is due to the high temperatures across the Northeast and Great Lakes regions which will heighten the demand for natural gas for cooling purposes.
The southern and central regions of the United States are expected to continue under a high pressure system throughout the rest of July with highs expected to remain in the upper 90s to low 100s. In the southeast regions, the heat index will keep temperatures between 105 and 113 degrees Fahrenheit. This will increase the demand for cooling.
These same high temperature and high pressure system are also expected to hit the northeast and Great Lakes regions in the following weeks which will continue to increase the demand for natural gas to cool down homes. There will be some cooler systems in the northwest and northeast regions bringing cooler temperature, but most of the rest of the United States will be seeing above average temperatures.
At this point it is unclear as to whether or not these large high pressure systems will remain throughout the United States going into early August. If the high pressure system continues, there will continue to be an increased demand for natural gas to cool homes. If the pressure desists, then the temperatures may drop to the average temperature for that time of year.
Last Thursday, the Energy Information Administration (www.eia.gov) reported that the natural gas stockpiles in the United States increased by 99 billion cubic feet during the week of July 10th. This was greater than the prediction made by analysts who estimated an increase of 95 billion cubic feet. This brought the total supplies of gas up to 2.1114 trillion cubic feet.
Due to the higher demand for cooling caused by the widespread warmer temperatures, experts believe that there will be a decrease in the supply levels for approximately 70 bcf, which is compared to 92 bcf last year. This is up compared to the average five-year gain of just 53 bcf. The build is expected to decrease in the coming weeks.Published in News & Analysis