Investing.com - Natural gas futures rallied to a two-month high during U.S. morning trade on Wednesday, as bullish momentum from the previous session carried over after the U.S. government trimmed its estimate for domestic natural gas production growth in 2012.
On the New York Mercantile Exchange, natural gas futures for delivery in June traded at USD2.460 per million British thermal units during U.S. morning trade, rallying 2.8%.
It earlier rose by as much as 2.95% to trade at USD2.466 per million British thermal units, the highest since March 2.
Natural gas prices surged in the final hour of trading on Tuesday after the U.S. Energy Information Administration projected demand from the power-generating sector will rise nearly 21% this year, as utilities move away from pricier coal to cheaper natural gas.
The EIA said the stronger utility demand will offset declines in the residential and commercial sectors that were caused by the unusually warm winter.
Total gas demand this year is expected to rise 5.1%, to 70.2 billion cubic feet, a modest upward revision from the forecast a month earlier. The agency also trimmed its estimate for marketed gas production growth in 2012 but still sees output at a record high 69.14 billion cubic feet per day.
Sentiment on the heating fuel has improved in recent weeks after hitting a string of fresh 10-year lows. Prices are up almost 23% since hitting a decade-low of USD1.902 on April 19, amid indications major North American natural gas producers were cutting back on production in response to lower prices.
Speculation that utility providers in the U.S. were switching from pricier coal to cheaper natural gas provided further support over recent sessions. U.S. power companies used 34% more gas in February than a year earlier, Energy Department data showed.
However, market players noted that sustained prices back above USD2.50 and toward the USD3.00-level likely would inspire some switching back to coal.
Meanwhile, natural gas traders were looking forward to the U.S. Energy Information Administration’s closely-watched weekly report on natural gas inventories due Thursday.
Early injection estimates range from 25 billion cubic feet to 65 billion cubic feet, compared to last year's build of 71 billion cubic feet. The five-year average change for the week is an increase of 84 billion cubic feet.
Despite the recent rally, prices remain vulnerable to a downside correction in the near-term as traders remain concerned over elevated U.S. storage levels.
The U.S. Energy Information Administration said last week that natural gas storage in the U.S. rose by 28 billion cubic feet to 2.756 trillion cubic feet, up 48% from year ago levels and 50% higher than the five-year average.
Current inventories are at levels they did not reach until July of last year.
If weekly stock builds through October match the five-year average, inventories would top out at 4.532 trillion cubic feet, 9% over peak capacity estimates of about 4.1 trillion cubic feet.
Elsewhere on the NYMEX, light sweet crude oil futures for delivery in June tumbled 1.3% to trade at USD95.75 a barrel, while heating oil for June delivery shed 0.5% to trade at USD2.975 per gallon.
On the New York Mercantile Exchange, natural gas futures for delivery in June traded at USD2.460 per million British thermal units during U.S. morning trade, rallying 2.8%.
It earlier rose by as much as 2.95% to trade at USD2.466 per million British thermal units, the highest since March 2.
Natural gas prices surged in the final hour of trading on Tuesday after the U.S. Energy Information Administration projected demand from the power-generating sector will rise nearly 21% this year, as utilities move away from pricier coal to cheaper natural gas.
The EIA said the stronger utility demand will offset declines in the residential and commercial sectors that were caused by the unusually warm winter.
Total gas demand this year is expected to rise 5.1%, to 70.2 billion cubic feet, a modest upward revision from the forecast a month earlier. The agency also trimmed its estimate for marketed gas production growth in 2012 but still sees output at a record high 69.14 billion cubic feet per day.
Sentiment on the heating fuel has improved in recent weeks after hitting a string of fresh 10-year lows. Prices are up almost 23% since hitting a decade-low of USD1.902 on April 19, amid indications major North American natural gas producers were cutting back on production in response to lower prices.
Speculation that utility providers in the U.S. were switching from pricier coal to cheaper natural gas provided further support over recent sessions. U.S. power companies used 34% more gas in February than a year earlier, Energy Department data showed.
However, market players noted that sustained prices back above USD2.50 and toward the USD3.00-level likely would inspire some switching back to coal.
Meanwhile, natural gas traders were looking forward to the U.S. Energy Information Administration’s closely-watched weekly report on natural gas inventories due Thursday.
Early injection estimates range from 25 billion cubic feet to 65 billion cubic feet, compared to last year's build of 71 billion cubic feet. The five-year average change for the week is an increase of 84 billion cubic feet.
Despite the recent rally, prices remain vulnerable to a downside correction in the near-term as traders remain concerned over elevated U.S. storage levels.
The U.S. Energy Information Administration said last week that natural gas storage in the U.S. rose by 28 billion cubic feet to 2.756 trillion cubic feet, up 48% from year ago levels and 50% higher than the five-year average.
Current inventories are at levels they did not reach until July of last year.
If weekly stock builds through October match the five-year average, inventories would top out at 4.532 trillion cubic feet, 9% over peak capacity estimates of about 4.1 trillion cubic feet.
Elsewhere on the NYMEX, light sweet crude oil futures for delivery in June tumbled 1.3% to trade at USD95.75 a barrel, while heating oil for June delivery shed 0.5% to trade at USD2.975 per gallon.