Natural gas little changed on mild weather forecasts

Natural gas swung between gains and losses on Tuesday after five straight days of declines as weather forecasters predicted mild weather in the U.S. that would curb demand for the power-plant fuel.

On the New York Mercantile Exchange, natural gas futures for delivery in November rose by 0.05% to $3.679 per million British thermal units at 9:00 GMT. The contract traded lower throughout Asian and early European trading, after which a rebound followed to session high of $3.680 per mBtu. The fuel fell 0.4% on Monday, marking a fifth consecutive daily decline, after adding 4.4% in the preceding two weeks.

Natural gas remained pressured amid forecasts for seasonal temperatures in most of the U.S. According to Commodity Weather Group LLC in Bethesda, Maryland, most of the lower-48 states will experience usual for this time of the year weather between September 28 and October 2, with higher readings expected in the Midwest. AccuWeather Inc. reported that temperatures in Washington on October 1 may peak at 73 degrees Fahrenheit, 1 below the average, while the high in Chicago will be 66 degrees, 3 below usual.

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. Consumption usually declines in Autumn before picking from November through March. According to the Energy Information Administration, power generation accounts for 32% of U.S. gas demand.

Market players also eyed EIA’s 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 year’s 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.