U.S. Gas Futures Decline

Source: Dow Jones Newswires, Mark Peters  (9/9/10)

"The market is in its seasonal shift—that's why it is under pressure."


Natural gas futures fell Thursday after the U.S. government reported an inventory in line with analysts' expectations.

Natural gas for October delivery on the NYMEX recently traded 1.78% lower at $3.746/MMBtu. Futures fell as low as $3.735/MMBtu after the report.

The U.S. EIA reported Thursday gas inventories grew by 58 billion cubic feet last week. Analysts and traders surveyed by Dow Jones Newswires were expecting a 58-bcf build.

Gas in U.S. storage for the week ended Sept. 3 stood at 3.164 trillion cubic feet—5.5% above the five-year average and 6.4% below last year. The storage estimate fell short of last year's 68-bcf build for the same week and the 61-bcf five-year average build for that week.

Summer storage builds have been lower than average due to unusually hot weather, which increases natural gas demand. Yet futures continue to come under pressure, particularly as the summer ends and winter-heating demand remains months away.

"The market is in its seasonal shift, and that's why it is under pressure," Tradition Energy Analyst Gene McGillian said.

He said he expects prices to grind lower as storage injections grow in the coming weeks amid more moderate temperatures. At the same time, production from onshore shale gas formations remains strong and industrial gas demand remains tepid amid an uncertain economic recovery.

Traders and analysts continue to watch the Atlantic Ocean for hurricane activity, which can disrupt offshore production in the U.S. Gulf of Mexico and cause price spikes. The National Hurricane Center is tracking tropical storm Igor, which is located about 50 miles south of the Cape Verde Islands off the coast of Africa. The center also is following an area of low pressure near the Windward Islands that has a 40% chance of developing into a tropical cyclone in the next 48 hours.