Natural Gas Futures Fall to Four-Week Low as U.S. Heat Retreats

Jun 23, 2014 10:04 am ET

June 23 (Bloomberg) -- Natural gas futures dropped to a four-week low in New York on speculation that a spell of mild weather will cause bigger-than-average stockpile gains.

Gas fell as much as 1.5 percent. Commodity Weather Group LLC in Bethesda, Maryland, predicted seasonal weather across the U.S. for the next five days before a surge of heat in the Midwest and East next week. Inventories have expanded by more than 100 billion cubic feet for six straight weeks, the longest triple-digit streak in data going back 20 years.

“Prices seem to be coming under pressure because of restocking fatigue,” said Teri Viswanath, director of commodities strategy at BNP Paribas SA in New York. “We are faced with the sixth consecutive triple-digit build. It reassures the market that the industry is making progress in building winter supply.”

Natural gas for July delivery declined 6.2 cents, or 1.4 percent, to $4.469 per million British thermal units at 9:49 a.m. on the New York Mercantile Exchange after dropping to $4.461, the lowest intraday price since May 27. Volume for all futures traded was 20 percent above the 100-day average. Gas is up 5.7 percent this year.

The weather will warm up starting next week, though the push of heat won’t be as intense compared with previous forecasts, Commodity Weather said. In contrast, MDA Weather Services in Gaithersburg, Maryland, predicted a strong surge of heat across the lower 48 states from June 28 through July 2 with above-normal readings lingering through July 7.

Hot Weather

The high in Chicago on July 1 will 93 degrees Fahrenheit (34 Celsius), 9 higher than usual, according to AccuWeather Inc. in State College, Pennsylvania. New York City may climb to 7 above normal to 90 degrees.

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.

“The latest forecasts suggests that the call on nat gas for cooling demand will not be atypical for this time of the year and thus inventory injections are likely to continue to outperform the historical injections,” Dominick Chirichella, senior partner at the Energy Management Institute in New York, said in a note to clients today.

Chirichella said gas stockpiles probably expanded by 101 billion cubic feet last week, while Tim Evans, an energy analyst at Citi Futures in New York, is expecting a gain of 93 billion. The five-year average increase for the period is 81 billion.

U.S. inventories totaled 1.719 trillion in the week ended June 13, the lowest level for the time of the year since 2003, according to the EIA. A supply deficit has narrowed to 33.1 percent from a record 54.7 percent in late March.