Natural gas plunges as inventories gain more than expected

Natural gas fell more than 1% in the U.S. trading session after the Energy Information Administration reported that U.S. inventories rose more than expected last week, indicating lingering demand. Market players continued to monitor tropical storm activity in the Gulf of Mexico.

On the New York Mercantile Exchange, natural gas for delivery in November fell by 0.32% to $3.531 per million British thermal units at 14:49 GMT. The contract fell to a six-week low of $3.494 per mBtu minutes after the release of the report after trading in a relatively narrow range throughout the day. Session high stood at $3.570 per mBtu. The fuel fell by 1.3% on Wednesday and extended its weekly decline to 1.6% on Thursday.

Gas continued to fall after the Energy Information Administration said in its weekly report that U.S. natural gas inventories rose by 101 billion cubic feet in the week ended September 27, underperforming analysts projections for a surge in the range between 82 and 100 billion cubic feet. Last weeks build was also well above last year’s 77 billion gain during the comparable week and the five-year average increase of 82 billion cubic feet.

Total gas held in underground U.S. storage hubs equaled 3.487 trillion cubic feet, which was 4.3% below last years inventories at 3.642 trillion. The surplus over the five-year average stocks of 3.438 trillion cubic feet widened to 1.4% after rising to 0.9% in the preceding week.

Losses however remained limited as market players continued to monitor tropical storm activity in the Caribbean Sea. The National Hurricane Center reported on Thursday that a low-pressure area over the northeastern tip of the Yucatan Peninsula of Mexico has now strengthened to a tropical storm named Karen with maximum sustained winds of up to 100 km/h. The agency also reported that additional strengthening is possible in the next day and Karen is expected to be at or near hurricane strength on Friday.

According to the Energy Information Administration, the Gulf accounts for 23% of U.S. crude production, 45% of petroleum refining capacity and 5.6% of domestic natural gas output.

BP Plc began to evacuate some personnel from its oil and gas platforms in the Gulf but production remained unchanged. Royal Dutch Shell, Anadarko Petroleum Corp and Hess Corp said they haven’t taken action yet but are monitoring the situation.