U.S. gas: Futures decline further, end the week down 5.8%

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Natural-gas futures settled Friday just about where the market was three weeks ago, continuing a slide from Thursday into the weekend.

Natural gas for September delivery settled down 9.9 cents, or 2.3%, at $4.145 a million British thermal units on the New York Mercantile Exchange.

The benchmark contract settled at its lowest price since July 7 and was also down about 5.8% on the week.

Friday's session was marked by low volume as traders weighed moderating weather forecasts with plenty of supply of the power-plant fuel.

The recent hot weather pattern is receding slightly in the next two weeks, though above-normal temperatures will hang on in the south central U.S., Commodity Weather Group said.

Demand for natural gas is likely to be lower if less of it is needed to generate electricity to power air conditioning.

Along with weather, injection reports continue to drive futures prices down, said Jason Schenker, president of Prestige Economics in Austin, Texas.

Whether the market could push lower to $4 is "really going to depend on the size of injections," Schenker said.

Thursday's data showed a larger-than-expected storage injection, pushing prices down more than seven cents in that day's session.

Inventories are forecast to surpass 3.8 trillion cubic feet at the end of October due to high production rates and a milder summer relative to last year, the Energy Information Administration said this month. New production and consumption data from the EIA were supposed to be released Friday, but have been delayed until Aug. 2.

Economic data released Friday morning wasn't supportive of natural gas either. Gross domestic product rose 1.3% in the second quarter, the Commerce Department said. This was lower than economists expected, and first-quarter growth was revised to 0.4% from an estimated 1.9%.

This data and the limited threat from Tropical Storm Don to production gave the market "some weak undercurrents for industrial natural gas demand," said Pax Saunders, an analyst with Gelber & Associates, in a client note.

Tropical Storm Don has caused oil-and-gas producers to limit some production in the Gulf of Mexico, but the gulf accounts for just more than 7% of U.S. natural-gas production.

The U.S. Bureau of Ocean Energy Management, Regulation and Enforcement said Friday that 6.2% of natural-gas production in the gulf was shut-in because of the storm, or 327 million cubic feet.

Some evacuated workers were already returning to oil and gas platforms as the storm passed, however. Tropical Storm Don is expected to reach Texas tonight or early Saturday, the National Hurricane Center said.

The forecasting center has also noted a large tropical wave in the Atlantic near South America is showing signs of organization. The system has a 30% chance of becoming a tropical cyclone in the next 48 hours.



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