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Natural gas weakens on warm weather, inventory levels

CommoditiesSep 24, 2012 04:05PM ET
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Investing.com - Natural gas futures traded lower during U.S. afternoon trade Monday, as warm weather forecasts worked with the overextended inventory levels to create a bearish environment for the commodity.

On the New York Mercantile Exchange, natural gas futures for delivery in October traded at USD3.046 per million British thermal units during U.S. afternoon trade, dropping 0.81%.       

It earlier fell by as much as 2.9% to trade at a session low of USD2.812 per million British thermal units.

The October contract is due to expire at the end of trading on Wednesday, September 26. Contract expiration often leads to volatile sessions as market participants look to close out positions or reposition their portfolios.

Meanwhile, the more actively traded contract for November delivery fell 1.1% to trade at USD3.038 per million British thermal units. The November contract tumbled by as much as 2.3% earlier to trade at a daily low of USD3.001.

Updated weather forecasts predicted normal or above-normal temperatures for most of the country into early October, dampening early-Autumn demand.

The Commodity Weather Group said earlier that warmer-than-normal temperatures are expected across the Midwest and East Coast over the next two weeks, keeping demand for heating "relatively low" for this time of year.

Natural gas demand typically rises in the summer as air-conditioning use boosts utility demand, then sinks in the fall as demand weakens ahead of the peak winter heating season. 

Ongoing concerns over bloated U.S. inventory levels also added to the selling pressure.

The U.S. Energy Information Administration said last week that natural gas storage in the U.S. rose by 67 billion cubic feet, just above market expectations for an increase of 64 billion cubic feet.

Last year, stocks rose by 89 billion cubic feet, while the average rise in the week over the previous five years was 73 billion cubic feet.

Total U.S. gas supplies stood at 3.469 trillion cubic feet, 10% above last year’s level and 9% above the five-year average level for the week.

Inventories did not top the 3.4-trillion cubic feet level in 2011 until October 5, with stocks peaking at a record 3.852 trillion cubic feet in November of last year.

Market analysts have warned that without strong demand through the rest of the summer cooling season, gas inventories will reach the limits of available capacity later this year. 

Early injection estimates for this week’s storage data range from 69 billion cubic feet to 83 billion cubic feet, compared to last year's build of 104 billion cubic feet. The five-year average change for the week is an increase of 76 billion cubic feet.

A bout of extreme heat across much of the U.S. earlier in the summer helped boost natural gas prices above the key USD3.00-level in late-July. Prices rallied to a 2012 high of USD3.275 per million British thermal units on July 31.

But futures have come under heavy selling pressure since the start of August, after extended weather forecasts pointed to milder weather across most parts of the U.S.

Elsewhere on the NYMEX, light sweet crude oil futures for delivery in November sank 0.97% to trade at USD91.98 a barrel.



 
Natural gas weakens on warm weather, inventory levels
 

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