Natural Gas Futures Cap Weekly Decline as U.S. Heat Moderates

Natural gas futures capped the first weekly decline in four weeks on speculation that easing heat will limit demand for the power-plant fuel.

Gas in New York slid 1.2 percent as MDA Weather Services predicted seasonal temperatures from Texas to the Northeast June 25 through June 29. A government report yesterday showed that gas supplies rose by more than 100 billion cubic feet for a sixth straight week, the longest triple-digit streak in data going back to 1994.

“The forecast in the short-term for Texas and Chicago, the heavy consuming areas, are showing cooler temperatures than normal,” said Santiago Diaz, energy trading associate at FCStone Latin America LLC in Miami. “We will have another injection number like yesterday. However, if we start to see those warm temperatures linger, then we could see support to the upside.”

Natural gas for July delivery fell 5.3 cents to $4.531 per million British thermal units on the New York Mercantile Exchange, the lowest settlement price since June 11. Volume for all futures traded was 21 percent below the 100-day average at 2:35 p.m. Gas declined 4.4 percent this week and is up 7.1 percent this year.

Weather models showed that less-intense heat than previously forecast will sweep the West Coast next week, said MDA in Gaithersburg, Maryland. Most of the lower 49 states will see above-normal temperatures from June 30 to July 4.

Hotter Weather

The high in Washington on June 23 will be 84 degrees Fahrenheit (29 Celsius), 2 below normal, before climbing eight days later to 98, 10 above average, according to AccuWeather Inc. in State College, Pennsylvania.

Electricity generators are the biggest consumers of gas in the country, accounting for 31 percent of demand, data show from the U.S. Energy Information Administration, the statistical arm of the Energy Department.

Gas inventories last week rose by 113 billion cubic feet to 1.719 trillion, the lowest level for the time of the year since 2003, an EIA report yesterday showed. The five-year average gain was 87 billion. A supply deficit narrowed to 33.1 percent from a record 54.7 percent in late March.

Stockpiles will climb to 3.424 trillion cubic feet by the end of October, which would be the lowest start to the peak heating season since 2008, the EIA said in its Short-Term Energy Outlook on June 10. New wells coming online at the Marcellus shale deposit in the Northeast will drive a 4 percent gain in production this year to a record 73 billion cubic feet a day from 2013 levels.

Average Rate

To get to the government’s October supply projection, inventories will need to increase at an average rate of 85 billion cubic feet per week in the next 20 reports. Supply gains averaged 82 billion during the first 11 weeks of the refill season.

The drop in gas prices this week “might prove short-lived as the subsequent build in cooling demand possibly prevents the weekly stock build from breaching the 100 bcf mark for the next several months,” Teri Viswanath, director of commodities strategy at BNP Paribas SA in New York, wrote in a note to clients today.

“We expect prices will remain supported above the $4.50 level and will likely recover on further warmer changes to the weather forecasts next week,” she said.

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