Natural Gas Caps Sixth Straight Weekly Drop on Mild Weather

Jul 25, 2014 3:21 pm ET

July 25 (Bloomberg) -- Natural gas futures capped a sixth consecutive weekly decline on forecasts for mild weather that would curtail demand for the power-plant fuel.

Gas prices last fell for six straight weeks in 2010. Temperatures are expected to be lower than normal in parts of the Midwest, Great Lakes region and South through Aug. 8, according to Commodity Weather Group LLC. The high in Chicago on July 29 may be 76 degrees Fahrenheit (24 Celsius), 8 below average, data from AccuWeather Inc. show.

“The weather is looking exceedingly mild,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. “We’re seeing below-normal temperatures for at least the next two weeks. The gas market is looking very bearish for the near term.”

Natural gas for August delivery fell 6.6 cents, or 1.7 percent, to settle at $3.781 per million British thermal units on the New York Mercantile Exchange. Volume for all futures traded was 29 percent below the 100-day average at 3:03 p.m. Gas slid to $3.744 in intraday trading yesterday, the lowest price since Nov. 26. Futures are down 11 percent this year and dropped 4.3 percent this week.

The high in New Orleans on July 31 may be 88 degrees Fahrenheit, 3 below normal, according to AccuWeather in State College, Pennsylvania.

Power plants account for 31 percent of gas consumption, data from the U.S. Energy Information Administration show. The agency is the Energy Department’s statistical arm.

Gas Inventories

Gas inventories rose 90 billion cubic feet in the week ended July 18 to 2.219 trillion, compared with the five-year average gain of 46 billion, according to the EIA. It was the 14th consecutive week of above-normal stockpile additions.

The EIA predicts that marketed gas production will advance 4.1 percent in 2014 to 73.08 billion cubic feet a day, reaching an all-time high for a fourth straight year. Record output will bring inventories to 3.43 trillion cubic feet by the end of October, which would be the least for that period since 2008, the agency said July 8 in its monthly Short-Term Energy Outlook.

“Natural gas production growth seems unrelenting,” Jeff Dietert, an analyst at Simmons & Co. in Houston, said in a note to clients today.

Supply from the Marcellus shale formation in the Northeast will climb 1.6 percent to 15.482 billion cubic feet a day in August from a month earlier, the EIA said July 14 in its monthly Drilling Productivity Report.

The numbers of rigs drilling for natural gas in the U.S. rose by three to 318 this week, according to Baker Hughes Inc. The total is down 15 percent this year.