Natural-gas futures pushed lower Thursday after the government said U.S. stockpiles rose by slightly more than expected.
Natural gas for September delivery settled 4.1 cents, or 1.04%, lower, at $3.892 a million British thermal units on the New York Mercantile Exchange. The benchmark contract has traded below $4/MMBtu--an important psychological barrier--during 10 of the last 11 sessions.
Thursday's slide came despite slightly more bullish weather forecasts and a storm that is brewing south of the Gulf of Mexico. Those factors likely kept prices from dropping further.
"The momentum remains in the bears' corner, but it only goes so far once we approach $3.80," Pax Saunders, an analyst with Gelber & Associates in Houston, wrote in a note to clients. "Tropical activity might have some taking profits now, limiting the downside."
The National Hurricane Center said that a tropical wave located about 200 miles northeast of Nicaragua has an 80% chance of developing into a tropical cyclone in the next 48 hours. Though its precise path is uncertain, the wave was moving west toward Central America at about 15 miles per hour Thursday, the NHC said.
While the Gulf of Mexico accounts for less than 12% of U.S. natural-gas output, the threat of disruption to its gas-producing areas could "rattle the confidence" of investors betting that gas prices will fall further, Saunders said.
Meanwhile, the Energy Information Administration said domestic natural-gas stockpiles rose by 50 billion cubic feet the week ended Aug. 12, a build that was slightly higher than the 48 bcf predicted by analysts and traders surveyed by Dow Jones Newswires.
More importantly, the build was larger than last year's 28-bcf injection as well as the five-year average build of 43-bcf and helped trim storage deficits that have been propped open by unusually hot summer weather.
Inventories as of Aug. 12 stood at 2.833 trillion cubic feet, 2.5% below the five-year average and 5.8% below 2010 levels.
High temperatures have lifted demand for gas-fired electricity to power air conditioners and the recent skid below $4/MMBtu has come amid predictions for more moderate temperatures in many large power markets in the U.S. Thursday's forecasts, however, indicated that above-normal heat may linger in some areas over the next two weeks.
"Cooler temperatures are possible along the Northeast for the onset of the period, but this risk is limited," private forecasters MDA EarthSat said. "Beyond that, most areas see warmer trends within the forecast period."