A bearish weekly U.S. supply report sent natural gas future falling on Thursday though prices jumped back into positive territory in choppy trading as investors digested weather reports over the lower 48 U.S. states as well as in the tropical Atlantic Ocean.
On the New York Mercantile Exchange, natural gas futures for delivery in September traded at $3.857 per million British thermal units during U.S. trading, up 0.89%. The commodity hit a session low of $3.790, and a high of $3.955.
The September contract settled down 1.39% on Wednesday to end at $3.823 per million British thermal units.
Natural gas futures were likely to find support at $3.790 per million British thermal units, the session low, and resistance at $4.020, the high from Aug. 12.
The U.S. Energy Information Administration said in its weekly report that natural gas storage in the U.S. in the week ended Aug. 15 rose by 88 billion cubic feet, surpassing expectations for an increase of 83 billion cubic feet, which sent prices falling earlier Thursday.
Inventories rose by 58 billion cubic feet in the same week a year earlier, while the five-year average change is a build of 48 billion cubic feet.
Injections of gas into storage have surpassed the five-year average for 18 consecutive weeks, alleviating concerns over tightening supplies.
Total U.S. natural gas storage stood at 2.467 trillion cubic feet. Stocks were 500 billion cubic feet less than last year at this time and 535 billion cubic feet below the five-year average of 3.090 trillion cubic feet for this time of year.
Prices jumped back up in volatile trading session fueled by uncertainty over how weather patterns may affect prices.
A low-pressure system in the western Atlantic Ocean appeared poised to develop into a tropical cyclone, with the National Hurricane Center giving the storm a 50% chance of becoming a tropical depression in 48 hours and a 70% chance in 5 days.
The latest model runs at the time of writing appeared to keep the system in the Atlantic Ocean and out of the gas-rich Gulf of Mexico, but uncertainty priced in the possibility that the storm could disrupt operations should it develop.
Elsewhere, weather uncertainty over the lower 48 states fueled volatility as well.
Weather systems will trek across the northern U.S. through the first week of September and push milder temperatures into the central and southeastern U.S.
Mild temperatures cut into demand for air conditioning this time of year, which is bearish for natural gas.
"Shorter term; it will remain quite hot over the southern U.S. and Midwest through this weekend, but then temperatures will begin to scale back as the Canadian weather system we have been advertising gradually tracks across the country," Natgasweather.com reported in its Thursday midday update.
"Weather patterns continue to look quite bearish after the current warm up over the central and eastern U.S. plays out. With a cool blast next week, followed by what looks to be a mostly comfortable U.S. pattern going into the first week of September, and also with the threat of a hurricane becoming essentially nil, we think eventually $3.75 will again get tested," Natgasweather.com added.
"Right now, the markets are moving irrationally, and we think it's best to step aside unless you see an entry point you think is too good to pass up."
Elsewhere on the NYMEX, light sweet crude oil futures for delivery in October were up 0.90% at $94.29 a barrel, while heating oil for September delivery were up 0.36% at $2.8359 per gallon.