Forexpros - Natural gas futures came under heavy selling pressure during U.S. morning trade on Thursday, turning sharply lower after a report from the U.S. Energy Information Administration showed U.S. gas supplies rose more-than-expected last week. On the New York Mercantile Exchange, natural gas futures for delivery in August traded at USD2.743 per million British thermal units during U.S. morning trade, plunging 3.85%. It earlier rose by as much as 0.7% to trade at a session high of USD2.873 per million British thermal units. The August contract traded at USD2.790 prior to the release of the U.S. Energy Information Administration report. The U.S. Energy Information Administration said in its weekly report that natural gas storage in the U.S. in the week ended July 6 rose by 33 billion cubic feet, above market expectations for an increase of 26 billion cubic feet. Inventories rose by 87 billion cubic feet in the same week a year earlier, while the five-year average change for the week is an increase of 90 billion cubic feet, according to U.S. Energy Department data. Total U.S. natural gas storage stood at 3.135 trillion cubic feet as of last week. Stocks were 548 billion cubic feet higher than last year at this time and 516 billion cubic feet above the five-year average of 2.619 trillion cubic feet for this time of year. The report showed that in the East Region, stocks were 229 billion cubic feet above the five-year average, following a net injection of 20 billion cubic feet. Stocks in the Producing Region were 196 billion cubic feet above the five-year average of 923 billion cubic feet, after no net change in stock levels. U.S. gas inventories did not hit the milestone 3 trillion cubic feet level until August 31 of last year. Market analysts have warned that without strong demand through the rest of the summer, gas inventories will reach the limits of available capacity later this year. The storage surplus to last year will have to be cut by at least another 355 billion cubic feet in the 19 weeks left before winter withdrawals begin to avoid breaching the government's 4.1 trillion cubic feet estimate of total capacity. Natural gas futures remained supported after updated weather forecasts showed that the U.S. Midwest was expected to remain hot and dry until the middle of July, while heat returns to the East Coast next week. A bout of hot weather across much of the country over the last several weeks helped boost natural gas prices. Spot prices have rallied nearly 25% in the past three weeks, as extreme heat conditions in the U.S. mid-Atlantic boosted demand for the fuel. Warmer-than-normal temperatures increase the need for gas-fired electricity to power air conditioning, boosting demand for natural gas. Natural gas accounts for about a quarter of U.S. electricity generation. From a technical standpoint, market participants noted that prices were expected to face strong resistance above the USD3.00-mark, a level widely considered to be where gas loses its appeal over coal for power generation. Prices hit a seven-month high of USD3.023 on July 6, but have lost nearly 8% since then. Elsewhere on the NYMEX, light sweet crude oil futures for delivery in August tumbled 1.6% to trade at USD84.45 a barrel, while heating oil for August delivery fell 1.2% to trade at USD2.729 per gallon.

Source