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Natural Gas Futures Gain After Smaller-Than-Forecast Supply IncreaseJuly 3rd, 2008Natural gas futures rose to the highest in more than two years after a government report showed a smaller-than-forecast increase in U.S. stockpiles. Inventories gained 85 billion cubic feet in the week ended June 27 to 2.118 trillion cubic feet, the Energy Department said. Analysts predicted an increase of 89 billion cubic feet. Concern that supplies may not be high enough before winter, when demand peaks, has helped send prices up 81 percent this year. ``There's still a great deal of concern about our ability to reach 3.5 trillion cubic feet by the end of October,'' said Peter Beutel, president of energy consultant Cameron Hanover Inc. in New Canaan, Connecticut. Natural gas for August delivery rose 18.8 cents, or 1.4 percent, to settle at $13.577 per million British thermal units at 2:57 p.m. on the New York Mercantile Exchange. It was the highest closing price since Dec. 21, 2005. The exchange floor is closed tomorrow for Independence Day. Electronic trading will be available for settlement on July 7. ``There's still a lot of summer in front of us with hot weather and tropical storms, which potentially could give us light builds,'' Beutel said. ``Traders are alert for any kind of tropical activity no matter how small. A lot can go wrong between here and 3.5 trillion cubic feet.'' The five-year average stockpile increase for this time of year is 86 billion cubic feet. Gas supplies last week were 57 billion cubic feet, or 2.6 percent, below the five-year average, today's report showed. Supplies were 381 billion cubic feet, or 15 percent, below the same period a year earlier. Risk Removed``Average is the new tight; that's the market sentiment of the moment,'' said Tim Evans, an energy analyst for Citi Futures Perspective in New York. ``This data removed the risk of a bearish surprise.''The five-year average in storage to start the winter demand period on Nov. 1 is 3.327 trillion cubic feet. ``The number was a little bullish,'' said Phil Flynn, senior trader at Alaron Trading Corp. in Chicago. ``It was pretty much in the range of expectations.'' Tropical Storm Bertha developed off the Coast of Africa, the U.S. National Hurricane Center in Miami said. ``There's tropical activity out there and the trend of'' being at or just below the five-year average for injections continues, said Flynn. Storms entering the Gulf of Mexico can force companies to shut gas-production platforms. Hot weather will be more of a factor for the U.S. next week than Bertha, said Jim Rouiller, senior energy meteorologist for Planalytics Inc. of Wayne, Pennsylvania. Rising Temperatures``Philadelphia and Washington could be into the 90s by July 8. The whole country is trending warmer,'' said Rouiller. ``Cooling demand will be the highest we've seen so far this year.''Hotter weather typically curbs the expansion of storage by increasing demand from gas-fired power plants for electricity to run air conditioners. Any threat from Bertha to the U.S. ``should be considered very low to non-existent'' at this time, Rouiller said. Reduced supplies of liquefied natural gas and declining shipments of gas from Canada have spurred speculation of a possible supply crunch next winter. U.S. LNG imports this year may be as much as 30 percent less than the 770 billion cubic feet recorded in 2007, the Energy Department said June 10. LNG played a role in lifting stockpiles to a record 3.545 trillion cubic feet by Nov. 1, 2007. Higher gas prices in Europe and Asia have meant fewer shiploads for the U.S. June shipments averaged about 900 million cubic feet a day compared with 2.8 billion for the same month a year earlier, Stacy Nieuwoudt, an analyst at Tudor, Pickering, Holt & Co. in Houston, said in a note today. LNG is a gas that's cooled to a liquid for transport by ships to markets not connected by pipelines. The fuel is received at import terminals and converted back to a gaseous form so it can be sent by pipeline to users. - Reg Curren in Calgary at Bloomberg. Click here for your Free Natural Gas Futures Trading eGuide | |