Signs of waning autumn natural-gas demand sent futures slightly lower Tuesday, but a storm brewing in the Atlantic Ocean kept a floor under prices.
Natural gas for October delivery settled down 3.1 cents, or 0.8%, to $3.798 a million British thermal units on the New York Mercantile Exchange.
Futures finished lower in thin volume as market participants focused on the likely tapering-off of demand during the autumn "shoulder season." That period, which straddles peak summer cooling season and the winter heating season, typically features sluggish gas demand.
Weather forecasts, meanwhile, offered a mixed picture on temperatures in the coming weeks, dashing hopes that a late-summer spike in temperatures would boost gas-fueled cooling demand.
Private forecaster MDA EarthSat said it sees above-normal temperatures through much of the West over the next six to 10 days, but cooler-than-usual weather should prevail in the South during the same period.
"We're in a demand-neutral situation," said Pax Saunders, analyst at Gelber and Associates in Houston. "The heat in Texas is fading and the West is the only lingering cooling-demand" area.
Market watchers say prices are likely to remain under pressure in the coming weeks, barring an unusual bout of cold weather--triggering gas-fueled heating demand--or a storm in the Gulf of Mexico production area.
Market participants are monitoring a storm brewing in the South Atlantic, which could threaten Gulf Coast production if it escalates and heads northwest.
The National Hurricane Center said a westward-moving formation of "cloudiness and thunderstorms" has a 70% chance of becoming a tropical cyclone in the next 48 hours.
"The market appears to be attempting to insert some storm premium, but follow through buying interest above the $3.80 level has been limited thus far," said Jim Ritterbusch, head of the trade-advisory firm Ritterbusch and Associates in Galena, Ill.
Signs of waning demand, elevated production and a relatively mild hurricane season have kept gas futures under the psychologically significant $4/MMBtu marker in recent weeks. Futures hit a six-month low of $3.743/MMBtu on Monday before rebounding to finish slightly higher.
Prices could head even lower later this week if the Energy Information Administration reports a bigger-than-expected build in gas storage in its weekly inventory survey due Thursday.