NYMEX natural gas futures, shrugging off a bearish weekly inventory report, ended sharply higher on Thursday, backed by a record run up in crude and hot weather over much of the nation this week that kicked up demand, traders said.
August natural gas futures rallied 34.7 cents, or 6 percent, to close at $6.129 per million British thermal units after opening at $5.85, then sinking to $5.72 shortly after the EIA storage report. Just prior to release of the stock data at 10:30 am, he spot contract was trading in the $5.86 area.
September settled 34.2 cents higher at $6.334. Winter months also gained, with January up 34.2 cents to $10.419.
"Heat has been a big player in the gas market (this week). It looks like we rallied up to the 40-day moving average (in the $6.19 area), then met some (technical) resistance," said one southern-based risk manager, adding record high crude prices also fuelled some of today's buying.
But despite the 11-percent rally this week and heat-related gains in the cash market, many traders still expected record high inventories to limit the upside unless the heat is sustained or a Gulf Coast hurricane forms to threaten supplies.
Most traders agreed Thursday's 89 billion cubic feet weekly natgas stock build was bearish, noting it was well above Reuters survey estimates for a 76 bcf gain.
With 16 weeks left in the injection season, they also noted that only 50 bcf per week needed to be stored to get stocks to a record high 3.5 tcf by November 1. The five-year average weekly build for that period is about 67 bcf.
The storage report issued by the US Energy Information Administration showed that total domestic gas inventories of 2.704 trillion cubic feet stood at 426 bcf, or 19 percent, above last year.
And the overall stock total was still 581 bcf, or 27 percent, above the five-year average, a huge cushion that has eased concerns about building enough supplies for next winter.