Natural gas swings ahead of supplies data, weather outlook

Natural gas futures swung between gains and losses on Wednesday as market players weighed mild weather outlook, which suggests reduced demand ahead of the peak winter season, against expectations for a smaller-than-the-average gain in U.S. stockpiles last week.

On the New York Mercantile Exchange, natural gas futures for settlement in December traded at $3.625 per million British thermal units at 15:43 GMT, down 0.11% on the day. Prices fluctuated between days high and low of $3.661 and $3.611 per mBtu respectively. The power-station fuel shed 0.7% on Tuesday and extended its weekly decline to 2.8% after it lost nearly 1.6% in the preceding two weeks.

The energy source was pressured as weather forecasting models predicted that current cool temperatures in the eastern parts of the U.S. and the Midwest will moderate over the next six to ten days, limiting the power-plant fuels demand prospects. Commodity Weather Group LLC in Bethesda, Maryland, predicted yesterday mostly normal weather in the eastern parts of the U.S. between November 3 and November 12. According to AccuWeather Inc., temperatures in New York on November 6 may bottom at 45 degrees Fahrenheit, 1 above average.

When cool 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 U.S. electricity generation. Average and above-average readings during the winter season have the opposite effect. Consumption usually picks up from November through March. According to the Energy Information Administration, power generation accounts for 32% of U.S. gas demand and 49% of U.S. households use the energy source for heating.

Market players will also be keeping a close watch on EIA’s weekly U.S. natural gas storage data. The Energy Information Administration reported last Thursday that U.S. natural gas supplies added 87 billion cubic feet in the week ended October 18, surpassing analystss projections and the five-year average increase of 67 billion cubic. Total gas held in underground U.S. storage hubs now equaled 3.741 trillion cubic feet, 2.1% below last year’s 3.833 billion. The surplus over the five-year average inventories of 3.644 trillion cubic feet widened by 0.5% to 2.1% from the preceding week.

Early injection estimates for this week’s build range between 20 and 43 billion cubic feet compared to the five-year average increase of 57 billion and last year’s 66 billion cubic feet gain during the comparable week.