Natural Gas Futures Drop to Six-Month Low as Hot Weather Fades

Jul 09, 2014 3:22 pm ET

July 9 (Bloomberg) -- Natural gas futures dropped to a six- month low for a third day in New York as meteorologists predicted cooler weather that would limit demand from power plants while a Northeast heat wave fades.

Commodity Weather Group LLC in Bethesda, Maryland, said temperatures may be average or below normal across the eastern two-thirds of the U.S. from July 14 through July 23. An Energy Information Administration report tomorrow may show gas stockpiles rose by 90 billion cubic feet in the seven days ended July 4, above the five-year average gain of 72 billion for the period, according to the median of 16 analyst estimates compiled by Bloomberg.

“The lack of extreme heat is putting pressure on gas prices,” said Tom Saal, senior vice president of energy trading at FCStone Latin American LLC in Miami. “Traders who had been bullish at the end of the winter are losing their resolve after all of these bigger-than-normal storage injections.”

Natural gas for August delivery fell 3.4 cents, or 0.8 percent, to $4.17 per million British thermal units on the New York Mercantile Exchange, the lowest settlement since Jan. 10. Prices are down 1.4 percent this year.

Gas storage injections surpassed five-year average gains for 11 consecutive weeks through June 27, according to the EIA, the Energy Department’s statistical arm. Supplies rose by 100 billion cubic feet or more for eight consecutive weeks, a record in government data going back to 1994.

October Supplies

Record production will bring stockpiles to 3.43 trillion cubic feet by the end of October, which would be the least for that time of year since 2008, the EIA said yesterday in its monthly Short-Term Energy Outlook. Marketed gas output may climb 4.1 percent to a record 73.08 billion cubic feet a day.

“The market is becoming more and more confident that the winter inventory situation may not be an issue,” Dominick Chirichella, senior partner at the Energy Management Institute in New York, said in a note to clients today.

Output from the Marcellus shale deposit in the Northeast will rise 1.9 percent in July to 15 billion cubic feet a day from 14.7 billion a month earlier, the agency said June 9 in its Drilling Productivity Report.

The high in New York on July 18 may be 83 degrees Fahrenheit (28 Celsius), 1 less than usual, according to AccuWeather Inc. in State College, Pennsylvania. Cleveland temperatures may reach 75 degrees, 7 below average

Power plants account for 31 percent of gas consumption, according to the EIA.