NEW YORK (Dow Jones)--Natural gas futures traded flat Monday, as some traders viewed the market's five-day skid as an opportunity to buy, but the market remains under pressure from mild weather likely to limit demand for the power-plant fuel.
Natural gas for July delivery recently traded unchanged at $4.325 a million British thermal units on the New York Mercantile Exchange.
The benchmark contract Friday ended at a four-week low, as five days of declines wiped out the gains made earlier this month in anticipation of an early season heat wave. Natural gas accounts for about a quarter of U.S. electricity generation, and demand for the fuel tends to rise with air conditioning use during the summer.
Major cities in the upper Midwest and Northeast should see near-average temperatures this week, meteorologists with MDA EarthSat said Monday, with warmer-than-normal weather across the southern tier of the country. Temperatures are expected to moderate further next week, with the heat retreating to a small area of the mid-Atlantic and parts of the Southwest.
"The mood in the market has turned decidedly bearish as temperature forecasts have moved closer to normal, nuclear outages have returned to seasonally normal levels, and production keeps growing," Barclays Capital analyst James Crandell said Monday in a note.
Gas futures also came under pressure last week as nuclear plants idled for spring maintenance returned to service. Gas-fired power stations are typically called upon to pick up the slack when nuclear plants go offline, and the recent rebound in nuclear output hit gas demand.
Production, meanwhile, is expected to grow. The number of drilling rigs seeking natural gas in the U.S. fell last week for a second consecutive week, according to data from oil-field service company Baker Hughes Inc., but the pace of activity is still at a level widely seen leading to increased output. There were 870 rigs targeting gas on the week, down nine from the previous week.
Further declines in gas futures this week would likely spur buying as traders bet that the recent selloff has pushed prices too low, said Peter Beutel, president of energy advisory firm Cameron Hanover, in a note to clients Monday.
"Prices under $4.30 are going to start to drag buyers from hiding," he added. "If (gas) should fall beneath $4.10, we would be shocked if buying did not become tremendous."
-By Matt Day, Dow Jones Newswires; 212-416-4986; matt.day@dowjones.com
