Natural gas futures retreated in New York on speculation that more moderate weather will limit fuel demand after a surge of heat in the U.S. this week.
Above-normal temperatures across the East Coast and the South over the next five days will give way to unusually mild readings in the Northeast July 25 through July 29, said MDA Weather Services. Manhattan’s high Monday rose to 94 degrees Fahrenheit (34 Celsius), 10 above normal, and will drop three days later to 82, AccuWeather Inc.’s website showed.
“We are coming off because this heat is certainly verified, but there is not another recharge behind this,” said Teri Viswanath, director of commodities strategy at BNP Paribas SA in New York. “As we transition into August, the weather is not going to be as supportive as it has been the past several weeks.”
Natural gas for August delivery fell 4.7 cents, or 1.6 percent, to $2.823 per million British thermal units on the New York Mercantile Exchange, the lowest settlement since July 10. Volume for all futures traded was in line with the 100-day average at 3 p.m. Prices are down 2.3 percent this year.
Speculators reduced bearish gas bets to the lowest level in seven weeks amid forecasts for unusually hot weather moving across Texas to the Northeast this week. Net-short positions for four gas contracts fell by 28 percent to 66,814 futures equivalents in the week ended July 14, dropping for the first time in four weeks, U.S. Commodity Futures Tradition Commission data show.
Weather forecasts over the weekend on the East Coast were “a little bit more moderate than the early guidance had provided on Friday” and outlooks indicate this week may be the peak for the summer heat, Viswanath said.
“Lighter load and higher production means we may see an acceleration of restocking in August,” she said.
Gas inventories totaled 2.767 trillion cubic feet on July 10, 2.7 percent higher than the five-year average for the time of year, U.S. Energy Information Administration data show. The surplus widened to the most since Feb. 13 as a lack of sustained summer heat limited demand for the power-plant fuel to run air conditioners.
Stockpiles probably fell by 76 billion cubic feet last week, Tim Evans, an energy analyst at Citi Futures Perspective in New York, said in a note to clients. The five-year average storage injection for the seven days is 53 billion, according to the EIA, which is schedule to release its next gas report on July 23.
Evans says the following two EIA reports will show lower supply gains of 63 billion and 52 billion, which would still be greater than the five-year averages for those weeks.