Natural gas futures fell to a five-week low, capping a third straight weekly decline, as forecasts for moderate U.S. weather signaled limited demand for the power-plant fuel.
Most states east of the Rocky Mountains will see seasonal readings June 10 through June 19 as the Midwest and mid-Atlantic get warmer weather next week, said Commodity Weather Group LLC. A gas stockpile gain last week was the biggest in 12 years, a government report Thursday showed.
“Fundamentally, there’s not enough demand to move prices higher at the moment; we still haven’t gotten any kind of summer load yet in a significant part of the country,” said Tom Saal, senior vice president of energy trading at FCStone Latin America LLC in Miami. “That was a big number yesterday, the second-largest injection ever.”
Gas for July delivery fell 3.6 cents, or 1.4 percent, to settle at $2.59 per million British thermal units on the New York Mercantile Exchange, the lowest settlement since April 28. Futures dropped 2 percent this week, completing the longest streak of weekly declines since early February.
July $3 calls were the most active options in electronic trading, slipping 0.3 cent to 0.8 cent on volume of 226 contracts at 2:44 p.m. July $2.50 puts rose 0.9 cent to 5.8 cents on volume of 223.
The high temperature in New York on June 8 may be a seasonal 77 degrees Fahrenheit (25 Celsius), while Washington may reach 87, 5 above average, AccuWeather Inc. said on its website. Readings in both cities will jump to 90 a week later.
“Power generation loads continue to underwhelm us,” Breanne Dougherty, an analyst with Societe Generale SA in New York, said in a note to clients Thursday. “Early June data indicates lighter loads than last year. The year-on-year comparison softening trend continues to feed an underlying bearish tone to the structural oversupply summer storyline.”
Gas inventories jumped by 132 billion cubic feet to 2.233 trillion cubic feet in the week ended May 29, the biggest gain for any week since July 4, 2003, U.S. Energy Information Administration data show. Supplies were 1 percent higher the five-year average, eliminating a 13 percent deficit in the first half of March.
U.S. gas production will jump 6 percent to a record 79.22 billion cubic feet a day this year, increasing for the 10th straight year as hydraulic fracturing, or fracking, makes it more economical to crack open shale deposits, EIA data show. Output gains are driven by new wells coming online at the Marcellus and Utica shale deposits in states including Pennsylvania and Ohio.
The Environmental Protection Agency said it found limited water pollution from fracking, according to a draft analysis released Thursday after three years of study. The research was commissioned by Congress and represents the most comprehensive assessment yet of the safety of fracking.
While fracking does have the potential to affect drinking water, “we did not find evidence that these mechanisms have led to widespread, systemic impacts on drinking water resources,” the EPA said.
“It was obviously a big decision that came out; I’m not surprised,” Saal said. “What was interesting is if anyone had any kind of bullish sentiment that the EPA was going to do something to slow the growth of fracking, that went out the window yesterday.”