Natural gas extends losses on mild weather forecasts

Natural gas fell for a fifth day as weather forecasters predicted seasonal temperatures to settle in most key consuming areas next week, curbing demand for the power-plant fuel.

On the New York Mercantile Exchange, natural gas for delivery in November fell by 0.52% to $3.744 per million British thermal units at 9:18 GMT. Prices held in range between days high and low of $3.751 and $3.665 per mBtu respectively. The power-station fuel fell by 0.60% on Friday, a fourth consecutive daily decline, but still settled the week 0.3% higher.

Gas continued to retreat amid forecasts for falling temperatures in the short term. Commodity Weather Group LLC in Bethesda, Maryland, predicted that the currently expected above-normal temperatures in the central U.S. will give away to seasonal weather across most of the U.S. between September 30 and October 4. AccuWeather Inc. reported that temperatures in Philadelphia today may peak at 68 degrees Fahrenheit, 7 below usual, while the high in Houston on September 24 will be 5 degrees above-average at 92 degrees but will drop to seasonal levels in the beginning of October.

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.

Market players also eyed EIAs weekly inventories data due to be released on Thursday. Early injection estimates range between 70 billion and 80 billion cubic feet, compared to the five-year average build of 75 billion and last years 79 billion storage increase during the comparable week.

Prices hit a 2-month high last Thursday as EIA’s upbeat data surpassed both analysts’ projections and the five-year average. 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.

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 conducted last week, 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.