Mild forecasts still weighing on U.S. natural gas futures

Mon Sep 23, 2013 9:24am EDT

NEW YORK, Sept 23 (Reuters) - U.S. natural gas futures lost
ground for the second straight session on Monday, pressured by
moderating weather forecasts for much of the nation over the
next two weeks that should slow overall demand.
    Front-month futures, which posted a two-month high of $3.82
on Thursday, finished last week nearly flat, gaining just 0.3
percent following a 4.2 percent rise the previous week.
    "The prompt contract is trading to its lowest level in five
days as the outlook for milder weather that may limit demand for
gas from power generators weighs on the market," Addison
Armstrong, director of market research at Tradition Energy in
Stamford, Connecticut, said in a report.    
    At 9:05 a.m. EDT (1305 GMT), front-month gas futures 
on the New York Mercantile Exchange were down 4.3 cents, or 1.2
percent, at $3.644 per million British thermal units, after
trading between $3.632 and $3.681.
    Some traders said the market seemed to be running out of
steam after gaining ground in five of the last six weeks.
Comfortable inventories, record-high gas production and fading
heat as milder autumn weather sets in have stirred doubts among
investors about further upside.
    Forecaster MDA Weather Services said warm temperatures
across northern tier states and seasonal-to-cool readings in the
South should continue to limit overall energy demand.
    Energy Information Administration data on Thursday showed
total domestic gas inventories had stood at 3.299 trillion cubic
feet. Stockpiles were 5 percent below last year's record highs
at that time, but 0.5 percent above the five-year average.
     
    Traders said production shut-ins last week from flooding in
Colorado might lead to another light storage build in next
week's EIA report. The Thomson Reuters Analytics Group estimates
that about 0.5 bcf per day may have been shut in last week. 
    Early injection estimates for Thursday's EIA storage report
range from 61 bcf to 71 bcf. Stocks gained 79 bcf during the
year-earlier week, while the five-year average increase for that
week is 75 bcf.
    Baker Hughes data on Friday showed the gas drilling
rig count fell by 15 last week to 386 after posting a six-month
high the previous week. 
    Despite the weekly rig decline, the count has risen in eight
of the last 13 weeks, stirring talk that new investment in
pipelines and processing plants was allowing producers to pump
more gas into an already well-supplied market.
    The EIA still expects U.S. gas production in 2013 to hit a
record high for the third straight year.
    Nuclear plant outages on Monday totaled 10,405 megawatts, or
11 percent of U.S. capacity, versus 11,110 MW out on Friday,
17,062 MW out a year ago and a five-year average outage rate of
12,047 MW.    
    Despite the rise in tropical activity this month, there were
no significant threats to Gulf of Mexico gas production.
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