Natural gas futures and commodity-related exchange traded funds jumped after hotter weather trends added to increased demand, fueling momentum in the gas markets.
On Thursday, the United States Natural Gas Fund (NYSEArca: UNG) gained 1.9% as natural gas futures added 2.0% to $2.94 per million British thermal units.
Traders also capitalized on the turning sentiment with leveraged long ETFs. For instance, three-times leveraged-long VelocityShares 3x Long Natural Gas ETN (NYSEArca: UGAZ) surged 6.5% Thursday while the ProShares Ultra Bloomberg Natural Gas (NYSEArca: BOIL), which takes the two times or 200% daily performance of natural gas, advanced 4.1%.
The Energy Information Administration revealed weekly storage injections of a net 96 billion cubic feet into the lower 48 gas stocks for the week ended May 25, compared to the 80 billion cubic feet build recorded for the same period last year and a five-year average 97 billion cubic feet buildup, reports Jermiah Shelor for Natural Gas Intelligence.
Bullish Weekly Inventory Numbers
“We see this print as slightly bullish, with both noisy production and burn estimates indicating either burns were a bit more impressive or production recovered less than expected,” Bespoke said following the report’s release. “Either way, such a print puts $3 in play today and indicates a marginally tighter market than expected, which adds support as we were already rallying off impressive heat risks in the long-range.”
“We do note that we are still solidly loose to the five-year average, and this print was a touch looser to even 2018 on balance, so with average weather the market has far to fall, but this print confirms we can run on heat,” Bespoke added.
Working gas in storage as of May 25 was 1,725 Bcf, compared to 2,513 Bcf a year ago and the five-year average inventories of 2,225 Bcf, according to EIA data. Compared to the prior week, the year-on-year storage deficit shrank from 804 Bcf to 788 Bcf, and the year-on-five-year deficit increased slightly from 499 Bcf to 500 Bcf. The lower inventory levels either indicate heightened demand or diminished supply, which are both bullish for natural gas prices.
For the mid-term outlook, some traders seem bullish due to concerns over stronger cooling demand to combat the summer heat while the market suffers from a storage deficit. Over the short-term, however, traders are watching next week’s weather forecast, which appears neutral to bearish at this time.
“This weekend into early next week will bring areas of showers across the northern U.S. with highs of 70s and 80s, while very warm to hot over Texas, the South, and SW,” according to Natgasweather.com.
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