Natural gas declines amid cooler weather

Natural gas declined for a second day as forecasting models pointed at cooling weather in the U.S., thus reducing demand for the fuel.

On the New York Mercantile Exchange, natural gas for August delivery traded at $3.741 per million British thermal units at 6:45 GMT, down 0.76% on the day. Prices held in range between days high and low of $3.752 and $3.723 per mBtu. Futures declined for a second day after settling 3.56% higher the previous week following EIAs report which showed natural gas inventories rose below expectations.

According to MDA Weather Services in Gaithersburg, Maryland, temperatures across the Midwest and East will turn cooler between July 24 an July 28 with below-normal seasonal readings for some parts of the region. According to AccuWeather Inc., Chicagos highest temperature on July 23 should be 79 degrees Fahrenheit, 5 degrees below normal, and Washingtons high may stand at 86 degrees, 2 degrees below the usual reading.

When above-normal temperatures are expected, natural gas surges as increased electricity demand to power air-conditioning calls for more supply of the fuel, which is used for a quarter of the U.S. electricity generation. Mild temperatures have the opposite effect.

Last week, the Energy Information Administration reported natural gas stockpiles rose less than expected, which shot the fuel up more than 4% on the day. According to the EIAs weekly report, Natural gas stockpiles rose by 58 billion cubic feet to 2 745 billion as of the week ending July 12. This was below market expectations for a 64 billion cubic feet gain and the five-year average 70 billion.

During the same week last year, natural gas reserves rose by 29 billion cubic feet to 3 159 billion, which was 13.1% higher than last week’s total stockpiles. The five-year average Natural Gas Storage stood at 2 779 billion cubic feet, 1.2% above the current.

Elsewhere on the market, WTI crude gained on the day, while Brent remained unchanged, narrowing the spread between the two benchmarks. On the New York Mercantile Exchange, WTI for September delivery traded at $108.19 per barrel at 6:45 GMT, up 0.29% on the day. Prices ranged between days high and low of $108.45 and $107.91 a barrel respectively. Meanwhile, Brent oil for September delivery stood at $108.41 a barrel at 6:44 GMT, down 0.06% for the day. Prices held in range between high at $108.55 and low of $108.18 respectively.