Natural Gas Futures Decline as Mild Weather Limits Consumption

Natural gas futures capped a second weekly decline on forecasts for mild weather that would limit power-plant demand, easing concern that supply will fall short of summer needs.

Gas slipped 1.3 percent after climbing 2.3 percent yesterday. Commodity Weather Group LLC predicted mostly normal temperatures on the East Coast from May 21 through May 25. The high in New York on May 21 may be 71 degrees Fahrenheit (22 Celsius), 1 less than average, according to AccuWeather Inc. Gas stockpiles totaled 1.16 trillion cubic feet in the week ended May 9, the lowest for that period since 2003.

“Traders are looking for some air-conditioning demand, and right now we’re not seeing anything,” said Tom Saal, senior vice president of energy trading at FCStone Latin America LLC in Miami. “We’re seeing some profit-taking ahead of the weekend after yesterday’s rally.”

Natural gas for June delivery fell 5.6 cents to settle at $4.413 per million British thermal units on the New York Mercantile Exchange. Volume for all futures traded was 1.2 percent below the 100-day average at 3 p.m. The futures declined 2.6 percent this week and have risen 4.3 percent this year.

The high in Philadelphia on May 23 may be 76 degrees Fahrenheit, matching the normal temperature, AccuWeather data show. Power plants account for 31 percent of gas consumption, according to the Energy Information Administration, the Energy Department’s statistical arm.

Gas inventories were 45.3 percent below the five-year average and 40.5 percent less than the year-earlier total in the week ended May 9, EIA data show.

Production Report

Gross gas output in the lower 48 states rose 0.1 percent in February to 75.37 billion cubic feet a day from a revised 75.32 billion the previous month, the U.S. said April 30 in its monthly EIA-914 production report. The “other states” category, which includes the Marcellus shale in the Northeast, gained 2.1 percent on new wells and improved weather conditions.

Gas production from the Marcellus will climb 1.8 percent in June to 14.6 billion cubic feet a day from 14.3 billion a month earlier, the EIA said May 12 in its monthly Drilling Productivity Report.

Goldman Sachs Group Inc. raised its 2015 natural gas price forecast to $4.25 per million Btu from $4, predicting stockpiles will reach a “historically tight level” of 3.4 trillion cubic feet by the end of October. Supplies last year peaked at 3.834 trillion as of Nov. 8, according to the EIA.

Summer gas prices may climb if cooling demand limits inventory gains, Jeffrey Currie, head of commodities research at the bank in New York, said in note to clients today.

The number of rigs drilling for natural gas in the U.S. climbed by three to 326 this week, according to data released today by Baker Hughes Inc. in Houston. The rig count is down 13 percent this year.

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