Natural gas falls on seasonal weather outlook

Natural gas retreated for a fourth consecutive day as weather forecasters predicted mild temperatures across key consuming areas. Half of the analysts who participated in a Bloomberg survey expected prices to extend their drop into next week, the same amount of bears as last weeks poll.

On the New York Mercantile Exchange, natural gas futures for delivery in October fell by 1.02% to $3.682 per million British thermal units at 11:50 GMT. Prices ranged between days high and low of $3.715 and $3.681 per mBtu respectively. The fuel fell by 0.5% on Thursday, a third consecutive daily decline, and trimmed its weekly advance to 0.2% following Fridays retreat.

Gas continued to edge lower despite EIAs surprisingly upbeat U.S. inventories statistics published on Thursday as weather forecasts called for mild temperatures in key consuming areas in the upcoming days. Commodity Weather Group LLC in Bethesda, Maryland, reported that the East Coast will experience seasonal weather next week, while the central U.S. will have above-normal temperatures. According to AccuWeather Inc., the high in Boston on September 24 may be 64 degrees Fahrenheit, 6 below the average, while temperatures in Washington may peak at 74 degrees, 2 below normal.

When warm weather is 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. According to the Energy Information Administration, power generation accounts for 32% of U.S. gas demand.

The power-station fuel continued to pare its weekly advance despite a surprisingly upbeat report by the Energy Information Administration. Prices hit a 2-month high on Thursday as the government agency reported that U.S. natural gas stockpiles rose by 46 billion cubic feet in the week ended September 13. Total gas held in underground storage hubs now equaled 3 299 billion cubic feet and was 5.4% below last year’s 3 486 billion during the comparable week. The surplus over the five-year average inventories narrowed down to 0.5% after remaining unchanged for two weeks at 1.4%, indicating increased recent demand.

EIA’s upbeat data surpassed both analysts’ projections and the five-year average. Analysts surveyed by Platts, the energy information arm of McGraw-Hill Cos., expected a build in the range between 55 billion to 59 billion cubic feet.

According to a Bloomberg survey of 14 analysts, seven of the participants, or 50%, wagered that prices will extend their fall through next week. Four, or 29%, expected the fuel to rise and the remaining three remained neutral.