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US Gas Futures Snap Four-Day Rally Streak

July 15th, 2011

NEW YORK (Dow Jones) – A larger-than-expected weekly increase of U.S. inventories pushed natural-gas futures lower Thursday, but futures pared those losses on continued forecasts for hot weather.

Natural gas for August delivery settled down 2.5 cents, or 0.6%, at $4.378 a million British thermal units on the New York Mercantile Exchange.

The Energy Information Administration said U.S. natural-gas stockpiles rose by 84 billion cubic feet last week, above the 76-bcf predicted by analysts surveyed by Dow Jones Newswires.

The benchmark contract began the session down about 5 cents, but continued its decline after the data release to reach an intraday low of $4.252/MMBtu.

This is the second-consecutive week of a larger-than-expected injection, though warmer weather led some analysts to expect smaller builds.

“People are starting to reassess end-of-season storage expectations,” said Cameron Horwitz, an analyst with Canaccord Genuity in Houston.

The market is seeing elevated levels of natural-gas supply, and inventories are forecast to surpass 3.8 trillion cubic feet at the end of October, the EIA said Tuesday.

A milder summer for 2011 is expected to contribute to the large size of the end-of-season inventory. Demand for natural gas tends to fluctuate with warmer weather in the summer as it is used to generate electricity to power air conditioners.

“We could see triple-digit injections in the back half of summer” if temperatures return to normal, Horwitz said.

The injection for next week is already expected to be lower due to the heat wave now affecting the country.

The East saw some relief from the heat Thursday, but futures erased some losses later in the session as weather reports still show heat sticking around the central part of the U.S.

Extreme heat is expected to “dominate” the Midwest for much of the six- to 10-day forecast, MDA EarthSat Weather said.

Hot-temperature forecasts extending to the end of July are providing most of the support for futures prices, said Jim Ritterbusch, head of trading advisory firm Ritterbusch & Associates, in a client note.

Prices are anticipated to have support at $4.25 and could move up toward $4.50, Ritterbusch wrote.

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By Amy D’Onofrio

Energy Facts

Energy Facts

Natural gas can be used as a raw material in a variety of products, including paint, fertilizer, plastics and medicines.

Natural gas produces fewer emissions than other fossil fuels, with less nitrogen, sulfur, carbon and fine particulates.

Texas produces the largest amount of natural gas in the USA.

The biggest consumer of coal in the US is the electric power sector.

There are 17,658 electric utility generators in the USA.
 

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