U.S. gas: Futures edge lower as demand diminishes

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Natural-gas futures fell Tuesday as less-widespread heat in the U.S. weighed on the market.

Natural gas for August delivery recently traded down 3.9 cents, or 0.9%, to $4.347 per million British thermal units on the New York Mercantile Exchange. The most actively traded contract, for September, recently traded down 4.5 cents, or about 1%, to $4.310.

Traders are betting demand for natural gas has lessened as heat this week isn't expected to be as intense or widespread as it was last week.

The Midwest and East are expected to be warm again, with the highest above-normal temperatures in Texas in the six- to 10-day forecast, private forecaster MDA EarthSat Weather said.

Above-normal temperatures in the next 10 days "should continue to provide strong support to natural-gas consumption," analysts with Barclays Capital said in a note to clients. This won't necessarily mean the market will see stronger natural-gas prices, the analysts said, since there are ample supplies out there.

Natural-gas drilling-rig counts continue to go up, said PFG Best analyst Phil Flynn, and that has contributed to the supply. Nuclear-power plants are also running "in full gear," he said, and this can reduce usage of gas-fired power.

Demand for natural gas tends to rise in the summer as more of the power-plant fuel is used to help generate electricity to run air conditioning. The Midwest and East saw record levels of power demand last week because of the heat.

Looking ahead, Commodity Weather Group expects hot weather events to outweigh cooler periods in August, according to the private forecaster's seasonal outlook released Monday. The forecaster noted that the most-active period of the Atlantic hurricane season will be Aug. 15 to Sept. 15.

The season has been fairly quiet so far, not affecting natural-gas production and demand. August natural-gas options expire Tuesday, and the last trading day for the futures contract is Wednesday.

Natural gas for next-day delivery at the benchmark Henry Hub in Louisiana recently traded at $4.42/MMBtu, according to IntercontinentalExchange, down 2.9 cents from Monday's average. Natural gas for Wednesday delivery at Transcontinental Zone 6 in New York traded at $4.90/MMBtu, down 9.9 cents from Monday's average.



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