FX: U.S. GAS: Futures Drop As Forecasts Point To Cooler Weather
Natural gas futures slumped Friday as weather forecasts signalled that cool temperatures through the end of September will likely lower gas usage and increase U.S. stockpiles.
Natural gas for October delivery fell 8.7 cents, or 2.9%, to recently trade at $2.950 a million British thermal units on the New York Mercantile Exchange. Futures had traded as high as $3.062/MMBtu earlier in the session.
Prices fell as cool temperatures moving are expected to move across much of the U.S. through the end of September. MDA Earthsat, a private forecaster, said Friday that below-normal temperatures are likely to be "widespread" across the midwest in its six-to-ten day forecast, with cool weather spreading to the east coast over the next 11 to 15 days.
Private forecaster WSI Energycast said a "fall-like El Nino pattern" will keep the west coast warm and dry but cool weather across the eastern two-thirds of the country.
Natural-gas prices typically react quickly to changes in weather forecasts, as declines in the cooling or heating needs of homes and businesses reduces demand from gas-fired utilities. In the fall, demand typically declines as air conditioning usage falls but heating hasn't been turned on yet.
"Cooler temps are going to keep the pressure on the bulls," said Drew Wozniak, an analyst at ICAP Energy.
Still, gas remains on pace for big gains this week, after a three-day, 38-cent rally Monday thru Wednesday that sent futures to the highest level in over a month.
One of the hottest summers on record made a big dent in the U.S. gas-supply glut, and prices moved higher amid smaller-than-average inventory injections in August.
Gas stockpiles stood roughly 60% above average in March, but data released Thursday from the U.S. Energy Information Administration showed that stocks now stand at just 9% above the five-year average level.
Natural gas for next-day delivery at the benchmark Henry Hub in Louisiana recently traded at $2.885/MMBtu, according to IntercontinentalExchange, compared with Thursday's average of $3.0071/MMBtu. Natural gas for next-day delivery at Transcontinental Zone 6 in New York traded at $2.9625/MMBtu, down from $3.0931/MMBtu.
Write to Jerry A. DiColo at jerry.dicolo@dowjones.com
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