Natural gas slumps as inventories gain more than expected

Natural gas extended its steep fall on Thursday after the Energy Information Administration reported gas inventories rose more than analysts expected last week, indicating weak demand.

On the New York Mercantile Exchange, natural gas for September delivery fell to $3.379 per million British thermal units at 14:51 GMT, marking a 1.96% daily decline. Prices held in range between days high of $3.454 and low at $3.344, the lowest since the week ending February 24. The fuel fell 0.20% on Thursday, a sixth straight daily decline, and extended its weekly fall to over 5.4% after plunging 5.2% a week earlier.

The Energy Information Administration reported in its weekly report that during the week ending July 26, the 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 weeks figure was also 1.2% below the five-year average stockpiles, which stood at 2 879 billion cubic feet. However, the government report underperformed expectations. According to a survey of analysts by Platts, the energy information arm of McGraw-Hill Cos., government statistics should have shown that natural gas inventories gained in a range between 54 billion and 58 billion cubic feet.

Natural gas also remained pressured and on track to mark a seventh straight day of daily declines as weather forecasts kept pointing at cooler than normal temperatures across most of the U.S. Northeast and Midwest over the next six to ten days. 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.