Natural gas extends losses on lower temperatures forecasts

Natural gas fell for a second day as weather forecasting models showed long-term temperatures in key U.S. consuming areas will fall back to normal.

On the New York Mercantile Exchange, natural gas for August delivery traded at $3.655 per million British thermal units at 6:28 GMT, down 0.68% on the day. Prices held in range between $3.682 and $3.641 per mBtu respectively. The fuel settled more than 0.7% lower yesterday, trimming this weeks advance to 0.37% after gaining around 2% during the preceding three.

Weather forecasters pointed at warmer temperatures in key consuming regions of the U.S., but long-term forecasts for the next 11-to-15 days in the Northeast showed expectations for a fall back to normal seasonal temperatures. The Northeast is a key consuming region. 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.

Meanwhile, investors are also keeping an eye on the U.S. Natural Gas Storage, due to be released on Thursday by the Energy Information Administration. Last Thursday, the EIA said in its weekly report that the natural gas stockpiles gained 82 billion cubic feet in the week ending July 5. The Natural Gas Storage indicator stood at 2 687 billion cubic feet, 14.2% below last year’s 3 130 billion cubic feet during the comparable week. This was also 0.8% lower than the five-year average reading of 2 709 billion cubic feet.

Early injection estimates for the week ending July 12 show stockpiles should gain between 50 billion to 70 billion cubic feet, up from last years 29 billion increase during the comparable week. The five-year average build stands at 70 billion cubic feet.