U.S. natgas futures fall to one-month low on milder weather

Tue May 7, 2013 9:26am EDT

* Front month well below recent 21-month high
    * Weather expected to moderate over next two weeks
    * Nuclear power plant outages remain below average

    By Eileen Houlihan
    NEW YORK, May 7 (Reuters) - U.S. natural gas futures sank to
their lowest level in just over a month on Tuesday, pressured by
forecasts calling for moderating temperatures over the next few
weeks.
    Traders said the milder weather forecasts and expectations
for another above-average storage injection weighed on prices.
Last week's unexpectedly large weekly inventory build led to a
7-percent selloff on Thursday before prices recovered slightly
on Friday.
    Prices remain well under last week's 21-month high hit
midweek.
    A long cold winter put a huge dent in inventories, and
lingering cool weather this spring led to a slow start to the
injection season.
    But the onset of milder spring weather starting this week
has curbed late-season heating demand before heavy cooling loads
kick in.
    As of 9:12 a.m. EDT (1312 GMT), front-month June natural gas
futures on the New York Mercantile Exchange were at
$3.985 per mmBtu, down 2.6 cents, after sliding as low as $3.96,
the lowest mark since early April.
    The contract rose to $4.444 last Wednesday, its highest mark
since late July 2011.
    The latest National Weather Service eight to 14-day forecast
issued on Monday called for above-normal temperatures for about
the western third of the nation and in the Northeast, with
below-normal readings in the Southeast and most of Texas and
normal readings elsewhere.
    Nuclear plant outages totaled 18,900 megawatts, or 19
percent of U.S. capacity, up from 18,200 MW out on Monday, but
down from 23,500 MW out a year ago and a five-year average
outage rate of 21,300 MW. 
    
    LARGER-THAN-EXPECTED BUILD BUT STOCKS BELOW NORMAL
    Last week's gas storage report from the U.S. Energy
Information Administration showed domestic inventories rose in
the prior week by 43 billion cubic feet, above Reuters poll
estimates for a 28 bcf build and the year-ago gain of 31 bcf.
 
    But inventories started the injection season about three
weeks later than expected due to the cold spring. Stocks, at
1.777 trillion cubic feet, are nearly 31 percent below last year
and more than 6 percent below the five-year average.

    Early injection estimates for this week's EIA gas storage
report range from 58 bcf to 91 bcf, versus a 30 bcf build in the
same week last year and a five-year average rise for that week
of 69 bcf.
    Baker Hughes data last week showed the number of
rigs drilling for natural gas in the United States fell by 12 to
an 18-year low of 353.
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