Natural gas extended its steep fall and declined for an eleventh straight day as weather forecasting models continued to point at below-normal temperatures for the season, reducing demand for the fuel.
On the New York Mercantile Exchange, natural gas for September delivery hit a new days low at $3.254 per million British thermal units at 14:12 GMT, down 1.94% on the day. This was the lowest since mid-February. Days high stood at $3.318 per Mmbtu. The fuel settled 0.96% lower on Tuesday, a tenth consecutive daily decline, and extended current weeks fall to over 2.6% after shedding 11.75% the preceding two five-day periods.
Natural gas was pressured in the last couple of weeks as weather forecasters predicted mild temperatures in most U.S. consuming areas. According to the Energy Information Administration, electricity generators will account for 32% of gas demand this year. 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.
Updated weather forecasts continued to call for below-normal temperatures across most of the U.S. Northeast and Midwest over the next six to ten days, limiting demand for the fuel.
Phil Flynn, a senior market analyst at Price Futures Group in Chicago, said for Bloomberg on Tuesday: “The forecasts through mid-August aren’t looking supportive. If we don’t see more cooling-degree days and power generation, it’s going to weigh on the market.”
Yesterday, natural gas rose throughout most of the day but still settled lower as weather forecasters predicted increasing temperatures in Texas. Commodity Weather Group LLC in Bethesda, Maryland, forecast above-normal temperatures across Texas through August 20. According to AccuWeather.com, the highest temperatures in Dallas on August 19 will reach 102 degrees Fahrenheit, 5 degrees above average.
Meanwhile, market players focus will be shifting to tomorrows weekly EIA natural gas storage report, due at 14:30 GMT. Early injection estimates put last weeks build in a range between 60 and 74 billion cubic feet. If confirmed, this would be well above the five-year average jump in inventories of 42 billion cubic feet and last years 25 billion during the comparable week.
Last week, the EIA reported said that during the week ending July 26, U.S. natural gas storage increased by 59 million cubic feet to 2 845 billion. This was 11.5% lower than the total amount of gas held in underground storage hubs in the same week a year earlier, which equaled 3 213 billion cubic feet. Last week’s figure was just 1.2% below the five-year average stockpiles, which stood at 2 879 billion cubic feet.
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