By Matt Day of Dow Jones Newswire
NEW YORK (Source: Wall Street Journal)–Natural gas futures fell Friday as mild weather and tepid demand for the fuel kept traders focused on high inventories.
Natural gas for November delivery fell 4.5 cents, or 1.2%, to $3.827 a million British thermal units on the New York Mercantile Exchange. The benchmark contract fell more than 2% Thursday after a report that U.S. stockpiles increased by more than expected last week.
High inventories have pressured prices lower this summer and stifled recent rallies, as strong production from unconventional sources depressed the market. Meanwhile, winter weather and the accompanying rise in gas-heating needs is still likely weeks away, and some forecasters have predicted a warmer-than-normal October, slashing the demand outlook for the fuel.
“There is no compelling reason to buy here right now,” said Peter Beutel, of energy-advisory firm Cameron Hanover. “At the same time, though, we do expect bargain-hunting at low prices.”
“North American markets remain inundated with production as a result of high rig counts and rig productivity,” analysts at Barclays Capital wrote in a client note. “Even with prices below $4, producers have shown limited willingness to cut drilling activity.”
Natural gas in U.S. storage for the week ended Sept. 24 stood at 3.414 trillion cubic feet, 6.3% above the five-year average, the Energy Information Administration said Thursday. The 74 billion cubic feet injection was above both the five-year average increase of 67 bcf and last year’s 65-bcf increase.
Futures have traded in a narrow range recently, weighed down by the oversupply, but supported as traders anticipate a typical seasonal rally. Gas prices typically reach a seasonal bottom in August or September before rising on expectations of the coming winter gas-heating demand.
Tropical storm activity also lent little support to prices. Despite predictions at the outset of hurricane season for significant disruptions to offshore gas production areas in the U.S. Gulf of Mexico, storms have generally steered clear of the region. The Gulf is home to about 10% of U.S. gas production, and prices can spike if hurricanes are seen threatening the energy infrastructure there.
-By Matt Day, Dow Jones Newswires; 212-416-4986; matthew.day2@dowjones.com
