FRX: Natural gas futures decline with supply data in focus
Forexpros - Natural gas futures were mildly lower during U.S. morning trade on Wednesday, as investors looked ahead to Thursday’s closely-watched U.S. government report on natural gas supplies.
Moderating weather forecasts across key parts of the U.S. through mid-June also added to the selling pressure.
On the New York Mercantile Exchange, natural gas futures for delivery in July traded at USD2.219 per million British thermal units during U.S. morning trade, shedding 0.6%.
It earlier fell by as much as 1.5% to trade at a session low of USD2.183 per million British thermal units. Prices touched USD2.174 on Tuesday, the lowest since April 30.
Market participants were looking forward to the U.S. Energy Information Administration’s closely-watched weekly report on natural gas inventories scheduled for Thursday.
Early injection estimates for the storage report range from 64 billion cubic feet to 80 billion cubic feet, compared to last year's build of 72 billion cubic feet. The five-year average change for the week is an increase of 88 billion cubic feet.
The U.S. EIA said last week that natural gas storage in the U.S. rose by 62 billion cubic feet 2.877 trillion cubic feet last week, the highest ever for this time of year and 33% above the five-year average.
Prices have lost nearly 2.5% so far this week, as last week’s bearish supply report renewed concerns about the massive domestic supply glut.
The larger-than-expected increase raised concerns over where excess gas will be stored later this year. The storage surplus to last year will have to be cut by at least another 465 billion cubic feet to avoid breaching the government's 4.1-trillion cubic feet estimate of capacity.
But the EIA’s projections issued Tuesday show gas storage will reach 4.015 trillion cubic feet in October, indicating that inventories will not reach storage capacity limits.
Moderating weather forecast further weighed, after the National Oceanic and Atmospheric Administration said temperatures in the central U.S. states are expected to be normal, while below-normal temperatures are expected in the West throughout the second half of June.
Demand for natural gas tends to fluctuate in the summer based on hot weather and air conditioning use.
Prices have been on the decline since touching a three-month high of USD2.820 on May 21. Despite the recent run of losses, natural gas prices are still up 15% since touching a decade-low of USD1.902 on April 19, amid indications major North American natural gas producers were cutting back on production.
Speculation that utility providers in the U.S. were switching from pricier coal to cheaper natural gas provided further support over recent weeks. However, market players noted that sustained prices back above USD2.50 and toward the USD3.00-level likely would inspire some switching back to coal.
Elsewhere on the NYMEX, light sweet crude oil futures for delivery in July fell 0.95% to trade at USD85.52 a barrel, while heating oil for July delivery was flat to trade at USD2.622 per gallon.
