- Market sees possibility of `extended injection season'
- Inventories likely to build in November, Viswanath says
Mild weather from New York to Los Angeles had gas bulls on the wrong side of bets as futures capped the biggest weekly decline in six weeks.
Temperatures may be higher than normal across most of the U.S. through Oct. 17, according to Commodity Weather Group LLC. Denver may reach 76 degrees Fahrenheit (24 degrees Celsius) on Oct. 16, 8 degrees above average, AccuWeather Inc. data show.
That’s pushing back early-winter demand for the heating fuel.
Natural gas for November delivery fell 4.4 percent to notch a third straight weekly decline, sliding as low as $2.403 per million British thermal units during intraday trading Friday on the New York Mercantile Exchange, the lowest since June 2012. Prices recovered slightly, ending the day up 1.8 cents, or 0.7 percent, at $2.451. The weekly decline was the biggest since Aug. 21.
“We have ample production and weak seasonal demand,” Tom Saal, senior vice president of energy trading at FCStone Latin America LLC in Miami, said by phone. “It’s just wearing on the market.”
Gas stockpiles rose 98 billion cubic feet in the week ended Sept. 25 to 3.538 trillion cubic feet, the Energy Information Administration said Thursday. Supplies were 15 percent above inventories from a year ago, the EIA said.
Stockpiles will probably continue to build in November, which would be just the fifth time since the mid-1970s that gas supplies outpaced demand for that month, said Teri Viswanath, director of commodities strategy at BNP Paribas SA in New York. That’s expected to bring storage levels to a record 4 trillion cubic feet, she said.
“The market is reacting to the possibility that we’re going to see an extended injection season,” she said. Traders are wondering “does it make sense to go any lower here? Is the market oversold?”
The record storage will be due to increased production in the Appalachian basin and new pipeline capacity that could total 2.5 billion cubic feet per day by the end of the year, Viswanath said in a note this week.
Hurricane Joaquin’s pivot away from the Eastern Seaboard wasn’t enough to rescue gas bulls heading into the weekend.
“The market is going to want to see the storm hit something before they think it’s going to influence the price,” Saal said.