Natural gas extends losses on ample supplies, lack of hurricane activity

Natural gas futures fell for a fourth straight day on Friday on speculations that ample U.S. supply will be sufficient to meet winter demand when nearly 50% of American households use the fuel for heating. Lack of hurricane activity in the Atlantic OCean also pressured prices.

On the New York Mercantile Exchange, natural gas futures for delivery in November fell by 1.38% to $3.705 per million British thermal units at 12:11 GMT. Prices held in range between days high and low of $3.767 and $3.685 per mBtu respectively. The fuel fell by 0.6% on Thursday, a third straight daily retreat, and extended its weekly decline to over 2.2% after rising by 7.8% in the preceding week.

Natural gas continued to decline as market players locked in gains after the fuel rose to a 4-month high on Tuesday on forecasts for colder weather. 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 the U.S. electricity generation. 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 gas for heating.

Extended forecasting models continued to call for below-normal temperatures across the central and eastern parts of the U.S. but speculations that the ample U.S. supply is sufficient to meet demand pressured prices down. Uncertainty to how long the below-average temperatures will continue also fanned negative sentiment.

According to a Bloomberg survey of analysts however, seven out of 12 participants expect prices to rise next week, while one was bearish and four predicted little change. Matt Rogers, president of CWG in Bethesda, Maryland said in a note to clients: “The cold push next week into the Midwest and also into the Deep South and the East is the biggest event so far this heating season.”

Commodity Weather Group LLCs forecast called for below-normal temperatures between October 22 and October 31 from the East Coast to the Rocky Mountains. According to AccuWeather Inc., temperatures in Chicago may bottom at 30 degrees Fahrenheit on October 24, 13 below average, while the low in New York may be at 36 degrees, 12 below normal.

Martin King, an analyst with FirstEnergy Capital Corp. in Calgary, said for Bloomberg: “Based on the last forecasts I saw, it’s still going to start cooling down this weekend and into next week. We will start to see some space-heating demand. Once we get the data, we will get a better sense of storage injections.”

The lack of hurricane activity in the Atlantic Ocean also pressured the market. Tropical storm activity usually sends prices up as hurricanes force oil producers to evacuate personnel from platforms in the Gulf of Mexico.

The Energy Information Administration said last Thursday that U.S. natural gas inventories rose by 90 billion cubic feet in the week ended October 4, compared to the five-year average build of 84 billion and last weak’s increase of 73 billion cubic feet during the comparable week. The reading however outperformed analysts’ expectations for a 94 billion cubic feet gain, allowing the energy source to extend positions.

U.S. natural gas stockpiles now totaled 3.577 trillion cubic feet and were 3.7% below the amount of gas held in underground storage hubs during the same period last year. The surplus over the five-year average reserves widened by 0.2% to 1.6%.

The Energy Information Administration delayed the release of its weekly natural gas and crude oil inventories report this week due to the lack of government funding. Jonathan Cogan, a spokesman at the EIA, said that the energy agency will publish its gas inventories data for the week ended October 11 on October 22 at 14:30 GMT and will then resume its normal Thursday releases.

Analysts surveyed by Bloomberg expected natural gas inventories to have risen by 77 billion cubic feet in the week ended October 11, above the five-year average increase of 75 billion.