Natural gas futures capped the first weekly gain since July 17 as sweltering heat faded, reducing demand for the fuel to power air-conditioning units.
Temperatures are forecast to moderate in the next few days. New York may reach a high of 82 degrees Fahrenheit (28 degrees Celsius) on Aug. 10, 1 degree below the norm, according to AccuWeather Inc.
“Quite frankly, we’re just running out of summer,” said Stephen Schork, president of Schork Group Inc., a consulting group in Villanova, Pennsylvania. “The general tenor of the market is bearish.”
Natural gas for September delivery fell 1.5 cents, or 0.5 percent, to settle at $2.798 per million British thermal units on the New York Mercantile Exchange. Prices were up 3 percent this week and down almost as much for the year. Volume for all futures traded was 7.9 percent above the 100-day average at 2:42 p.m.
High temperatures across the U.S. last week bolstered power demand. Gas deliveries to electricity generators were up 7.8 percent from a year ago through Thursday, according to LCI Energy Insight in El Paso, Texas.
The Energy Information Administration said Thursday supplies rose 32 billion cubic feet in the week ended July 31 to 2.912 trillion, the least since April 3. Analyst estimates compiled by Bloomberg and a survey of Bloomberg users predicted a gain of 40 billion.
“That was a smaller number than they had anticipated,” said Bob Yawger, director of the futures division at Mizuho Securities USA Inc. “That’s given the market a certain degree of support.”
Still, inventories may reach a record 4 trillion cubic feet by the end of October, according to Barclays Plc.
Producers have pulled back since June in response to the oversupply. Gas production from the seven largest U.S. shale basins will slip 0.6 percent to 45.1 billion cubic feet a day in August from a month earlier, the biggest drop since March 2014, the EIA said July 13.
A pipeline shutdown may affect midcontinent spot gas prices. Alliance Pipeline Inc. said it will close its mainline system for an indefinite period after it detected hydrogen sulfide.
Alliance operates a 2,391-mile pipeline system and delivers up to 1.6 bcf a day from Canada to the Chicago market. It will flare natural gas to dispose of the pollutant at its Alameda compressor station in Saskatchewan, according to a company statement.
The closing is unlikely to have a broad effect on domestic natural gas prices, according to Schork.