Natural gas futures remain lower despite upbeat inventories report

Natural gas futures pared daily losses but remained on negative territory despite a bullish inventories report by the EIA as weather forecasters predicted above-normal temperatures across the eastern U.S.

On the New York Mercantile Exchange, natural gas futures for settlement in December traded at $3.600 per million British thermal units at 14:57 GMT, down 0.57% on the day. Prices recovered from a session low of $3.564 after the release of the report, while days high stood at $3.659 per mBtu. The power-station fuel remained almost unchanged on Wednesday but extended its weekly decline to 3.5% on Thursday.

Natural gas was pressured throughout the day after weather forecasts continued to call for above-normal temperatures over the eastern parts of the U.S. in the beginning of November. MDA in Gaithersburg, Maryland, predicted that temperatures from the Mississippi River to the East Coast will be 3 to 5 degrees Fahrenheit higher than usual between November 5 and November 9, limiting demand for the power-plant fuel prior to the peak winter season. Temperatures across the West are projected to be 3 to 8 degrees below the average but demand in Eastern and Midwestern cities tends to weigh more on prices.

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.

Natural gas remained on negative territory despite EIAs bullish inventories data. The government agency reported that U.S. natural gas stockpiles added 38 billion cubic feet in the week ended October 25, well below the five-year average gain of 57 billion cubic feet and last years 66 billion increase during the comparable period. Total gas held in underground U.S. storage hubs now equaled 3.779 trillion cubic feet, 3.1% below last years 3.899 trillion. The surplus over the five-year average level of supplies narrowed by 0.5% to 1.6%.

Inventories in the East Region received a net injection of 17 billion cubic feet to 1.964 trillion and were 5.8% below last years figure. In the Producing Region, stockpiles rose by 18 billion cubic feet to 1.263 trillion and were 0.9% lower than a year earlier.