Natural Gas Tumbles Below $3.60 Despite Ongoing Hot Spell, Surplus Shrinks Slightly

Includes: UNG
by: Hard Assets Investor

By Sumit Roy

Natural gas was last trading down by almost 3% to $3.59/mmbtu after the Energy Information Administration reported that operators injected 58 billion cubic feet into storage last week, above the 53 to 57 bcf build most analysts were expecting. This was above last year’s build of 28 bcf, but below the five-year average build of 60 bcf.

In turn, inventories now stand at 3,188 bcf, which is 214 bcf below the year-ago level and 47 bcf above the five-year average (calculated using a slightly different methodology than the EIA).

The weather last week was warmer than seasonal norms and the same period a year ago. The Edison Electric Institute said that utilities generated 89,751 GWh in the week ending Aug. 31, which was 3.2% above the same week a year ago.

Looking forward, the NOAA's six- to 10-day outlook is calling for warmer-than-normal temperatures across much of the United States.

NOAA Six- to 10-Day Outlook

Meanwhile, the number of rigs drilling for natural gas in the U.S. fell by seven to 380 last week.

Natural Gas Rig Count

Natural Gas

Bottom line: The latest inventory data from the EIA were neutral, as surplus against the five-year average fell from 50 bcf to 47 bcf. The ongoing late-season warm spell across the country has allowed prices to rebound notably from August's $3.13/mmbtu low. However, we continue to see the possibility of one final leg lower ahead of winter once this heat wave breaks.