Barnett Shale

Natural gas prices top $3 on smaller inventory increase

Natural gas futures settled above $3 per million British thermal units for the first time since January.
Natural gas futures settled above $3 per million British thermal units for the first time since January. Star-Telegram archives

Natural gas futures settled above $3 per million British thermal units for the first time since January after government data showed that U.S. stockpiles expanded by less than forecast last week.

The Energy Information Administration said inventories rose 111 billion cubic feet in the week that ended May 8 to 1.897 trillion. Analyst estimates compiled by Bloomberg showed a gain of 116 billion, while a survey of users predicted an increase of 118 billion.

Gas has climbed 21 percent since dropping to a 34-month low April 27, driven by hotter-than-normal weather that has stoked demand from power plants. U.S. forecasts released Tuesday estimated that gas consumption by electricity generators will advance 13 percent this year from 2014.

“The storage number fell short of the forecasts,” said Teri Viswanath, director of commodities strategy at BNP Paribas in New York. “Traders are also looking ahead to a below-normal injection next week, so we may sustain these price gains. We’ve had elevated cooling demand with this relatively warm weather.”

Natural gas for June delivery rose 7 cents to $3.01 per million British thermal units on the New York Mercantile Exchange, the highest settlement since Jan. 16. Volume was almost double the 100-day average.

The stockpile increase was bigger than the five-year average gain for the week — 82 billion cubic feet — according to the information administration. Supplies were 66 percent above year-earlier inventories, compared with 71.1 percent in last week’s report.

“It seems as if the power generation market does not have an extra gear but will be quietly humming along in fifth,” said Aaron Calder, an analyst at Gelber & Associates in Houston. “It’s unlikely that we experience undersupplied conditions in the next six weeks, but power generation demand has shown that it can somewhat handle the flood of supply.”

The weather will be hotter than usual on the East Coast through May 28, according to MDA Weather Services in Gaithersburg, Md.

The high in New York on Saturday may be 82, 11 degrees above normal, AccuWeather said on its website. Philadelphia temperatures may advance to 87, 13 degrees above average.

Power plants account for 32 percent of gas demand in the U.S., data from the information administration show.

Natural gas consumption from power plants may advance this year to 25.21 billion cubic feet a day from 2014, the administration said Tuesday in its monthly Short-Term Energy Outlook. Industrial demand may rise 4 percent to 21.81 billion.

Gas production from the seven largest shale deposits in the U.S. will drop by 112 million cubic feet a day to 46.2 billion a day in June from a month earlier, the administration said Monday in its monthly Drilling Productivity Report.