U.S. natural gas futures are having their best week of the year on signs that summer-like temperatures in the East will help trim a supply glut.
Bloomberg reports that above-normal temperatures across most of the lower 48 states will rise higher in the South at the start of May, stoking demand for the power-plant fuel to run air conditioners. Preliminary pipeline data shows that stockpiles may increase by about 55 billion cubic feet this week, “way lower” than the year-earlier gain of 84 billion, according to Kyle Cooper, director of research with IAF Advisors and Cypress Energy Capital Management.
A gas surplus to the five-year average has narrowed 11% from a four-year high at the start of the month on an unexpectedly chilly start to April. Now warm weather may help buoy gas demand, which typically plunges this time of the year, between the winter heating and the summer cooling months.
“The apparent storage injections have dropped dramatically and have not been at the level that a lot of people expected,” says Cooper, based in Houston.
Natural gas futures for May delivery rose 5.9 cents, or 2.9%, to $2.127 per million British thermal units at 1:15 p.m. on the New York Mercantile Exchange. The futures were up 12% for the week, headed higher for the third time in four weeks and up the most since the week ended Jan. 1.
Short sellers covering their bearish bets appear to be driving the rally given the recent drop in total open interest in gas futures, Cooper says. Aggregate open interest fell 3.7% to a two-week low of 1.118 million contracts on Thursday from April 15, Nymex data show.
