Weather Forecasts Impacts U.S. Gas FuturesBy Lex Yaranu | Wednesday, July 22nd, 2015
Weather usually has a big impact on some prices, and in the case of gas it’s often possible to predict when usage will wane or peak. In the last week natural gas prices recovered from a fall-back last session. Market players appear to feel more confident based on assessments of the U.S. demand and supply levels increasing with the soaring temperatures.
Looking at updated weather forecast models it’s clear that large parts of the U.S. will see higher than average temperatures until late in the last week of the month. Market watchers know that natural gas is behind over a quarter of America’s electricity generation. The demand for natural gas generated electricity will rise and fall according to the use of air conditions. In the southern part of the U.S. some cities are experiencing difficulty keeping up with demand as air condition creates a greater demand.
The effect on the market is quickly visible as earlier this week natural gas lost 4.7 cents falling to $2.83 at the close. But now the futures are forecasted to support $2.776 starting July 17th, and resistance at $2.944 at the high. This is a change reflecting the weather patterns as last week’s weather across the U.S. was much milder.
At the present time natural gas storage stands at almost 3 trillion cubic feet. This is almost 31% higher than for mid-July of 2014. It’s also just under 3% above the five-year-average.
Temperatures could increase into the three digits for the Midwest, even into the northern part of the country as the summer continues. With storage low, and temperatures climbing the public still isn’t likely to see any trouble yet. An increase in billing is sure to follow this spike in use, but it’s unlikely that supply will be too low to fill the demands of users.
On July 23, the next report of Energy Information Administration is slated for release. It is expected that storage will demonstrate an increase at around 71 billion cubic feet on the weekend of July 17.
As the five-year average change with a spike of 53 billion cubic feet, there was an increase in supplies by 92 billion cubic feet in the same week last year. Moreover, crude oil set for September delivery advanced to 0.25% or 12 cents, selling at $50.55 per barrel. On the other hand, heating oil for delivery in August inched up by 0.19%, selling at $1.661 a gallon.Published in News & Analysis