Natural gas fluctuates, poised to decline through next week

Natural gas swung between gains and losses on Friday after surging on Thursday following a bullish report by the EIA. Forecasts for mild temperatures will curb demand and are expected to keep prices lower through next week.

On the New York Mercantile Exchange, natural gas futures for delivery in October traded at $3.657 per million British thermal units at 14:08 GMT, up 0.51% on the day. Prices rose to a session high of $3.662 per mBtu, while days low was touched earlier in the day at $3.604. The fuel rose 2.2% on Thursday and extended its weekly advance to over 3.7%.

Gas fell 0.9% earlier in the day amid forecasts for mild weather in key consuming areas, which limited demand prospects for the power-station fuel. Commodity Weather Group LLC in Bethesda, Maryland, predicted seasonal temperatures along the east and west coasts, with a warmer-than-usual weather remaining only in the Midwest. 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.

According to a Bloomberg survey of analysts, gas prices will most likely drop next week. Seven of fourteen participants expected futures to decline through September 20, while six were bullish and one remained neutral. Commodity Weather Group LLC said that warmer-than-average weather may linger in the Midwest but temperatures wont reach 90 degrees Fahrenheit like this week in New York and Chicago.

Aaron Calder, senior market analyst at Gelber & Associates in Houston, said for Bloomberg: “As we move into the more mild temperatures in the fall, power generators will have more flexibility to choose between the two fuels,” he referred to natural gas and coal. “They will choose the cheaper fuel, forcing natural gas to go lower to compete for market share.”

Gas surged more than 2% on Thursday following a bullish inventories report by the EIA. The agency said that U.S. natural gas stockpiles added 65 billion cubic feet in the week ended September 6, above the five-year average build of 62 billion. EIA’s statistics however outperformed the median estimate of six analysts, surveyed by Bloomberg, who predicted a 68 billion gain. Stockpiles increased by 27 billion cubic feet in the comparable week a year earlier.

Total gas held in underground storage hubs now equaled 3 253 billion cubic feet, and were 172 billion, or 5%, below last year’s 3 425 billion. The surplus over the five-year average of 3.207 trillion cubic feet remained unchanged at 1.4% from the preceding week.