After spending much of August trending downward, the United States Natural Gas Fund (UNG) rallied to $19.40 on Tuesday, September 4 finishing the day at $19.15. Prices are likely to fall again, however, as injections into storage are up 12% over the 5-year average, and residential demand fell 7.4% over last week. Hurricane Isaac was expected to blow in more trouble than it did and while some production facilities report minor damage after the storm, no major interruption in production has been observed.
The U.S. Energy Information Administration reports weekly nationwide natural gas consumption up 0.6% led by increased demand in the power sector which was up 3.6%.
While hurricane season may add an element of uncertainty, Isaac came and went with only precautionary interruptions in production. What is chasing prices higher now is a nearly 3% drop in the total U.S. natural gas supply.
Expect demand for natural gas to continue to fall as Autumn pushes temperatures down, inhibiting residential energy demands. Injection into storage continues to outpace recent years and is expected to do so for the foreseeable future. If the industry can avoid any major production disruptions, supply will outpace demand, softening natural gas prices.