Natural gas prices and related exchange traded funds rallied Thursday after the government reported natural gas in storage rose less than expected last week.
On Thursday, the United States Natural Gas Fund (NYSEArca: UNG) increased 8.5% and iPath Bloomberg Natural Gas Subindex Total Return ETN (NYSEArca: GAZ) jumped 15.2%.
Natural gas futures gained 8.7% to $2.89 per million British thermal units, rising the most in four weeks.
[related_stories]Meanwhile, the three-times leveraged-long VelocityShares 3x Long Natural Gas ETN (NYSEArca: UGAZ) advanced 25.3% Thursday while the ProShares Ultra Bloomberg Natural Gas (NYSEArca: BOIL), which takes the two times or 200% daily performance of natural gas, rose 16.5%.
Natural gas prices spiked Thursday after the U.S. Energy Information Administration revealed in its weekly report that that natural gas inventories for the week ended July 22 increased by 17 billion cubic feet to 3.294 trillion, the smallest storage injection for the time of the year since a withdrawal in 2006, reports Naureen Malik for Bloomberg.
In contrast, analysts projected a gain of 26 bcf. Natural gas inventories increased by 34 bcf in the prior week, 49 bcf a year earlier and a five-year average of 52 bcf, according to Investing.com.
Related: Natural Gas ETFs Surge on Bullish Inventory Data
Inventory injections have been trailing historic averages for most of the season, diminishing the supply glut as power generators consume a record amount of fuel while output declines. Consequently, some market watchers are even betting on a possibility of a supply deficit.
“This was way below the five-year average,” Bob Yawger, director of the futures division at Mizuho Securities USA Inc., told Bloomberg. “It wasn’t even close. After this number you can paint that picture where you can go into a deficit situation by November.”
Phil Flynn, senior market analyst at Price Futures Group, pointed out that some traders are speculating that next week’s report could show an even smaller inventory due to the oppressive summer heat.
Northeast and the mid-Atlantic are suffering a heat wave this week, with high temperatures in Washington up to 93 degrees Fahrenheit, the eighth consecutive day of 90 degree weather, according to AccuWeather Inc. MDA Weather Services forecasts above normal readings on the East Coast over the next five days will spread through the central U.S. on August 2 through August 6.
Related: Natural Gas ETFs for a Sizzling Summer Outlook
The rising temperatures have caused an uptick in electricity generation for cooling to combat the summer heat. According to PointLogic Energy data, power generators burned about 36.2 bcf a day of gas so far this month, up 9.6% year-over-year.
Nevertheless, total U.S. natural gas storage was at 3.294 trillion cubic feet, or 13.2% higher for the same period last year and 15.9% above the five-year average for this time of the year.
United States Natural Gas Fund