Natural gas futures and related ETFs surged Monday as hotter weather conditions helped stoke the electricity demand outlook for air cooling in more sweltering areas of the U.S.
The United States Natural Gas Fund (NYSEArca: UNG) gained 5.3% Monday after falling off 24.4% year-to-date. Meanwhile, Nymex natural gas futures were 5.4% higher to $2.31 per million British thermal units.
Bespoke Weather Services shifted its forecast to project a hotter first week of July, but the firm warned that trends in its weather models were mixed over the weekend, Natural Gas Intelligence reports.
The European model, “which had been the coolest model in terms of its surface temperature projection all of last week,” added several gas-weighted degree days (GWDD) over the weekend by “slowing down the retreat of heat back into the western U.S.,” Bespoke said. “It was joined by the Canadian ensemble, which made a similar shift.”
On the other hand, the American model showed a hotter last week but shifted cooler over the weekend, with changes on a three- to four-day period around the start of July.
“The weather component shifted a little more bullish over the weekend” because the European model showed “a little more heat into early July, but the overall weaker fundamentals data this morning keeps us neutral,” Bespoke added, pointing to an increase in the latest supply readings and somewhat weaker weather-adjusted power burns.
The more bullish outlook may have also fueled a knee-jerk rebound in an oversold natural gas market, which plunged last week after an updated larger-than-expected weekly increase in U.S. supplies. The U.S. Energy Information Administration revealed that domestic supplies of natural gas rose by 115 billion cubic feet for the week ended June 14, compared to average forecasts for about a 100 billion cubic feet gain. Total stockpiles were at 2.203 trillion cubic feet, or 209 billion cubic feet greater year-over-year.
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