Natural gas futures fell Tuesday, as traders weighed signs of waning autumn demand against the prospect of another Gulf Coast storm.
Natural gas for October delivery recently traded down 2.5 cents, or 0.7%, to $3.804 a million British thermal units on the New York Mercantile Exchange.
Weather forecasts offered a mixed picture on temperatures in the coming weeks, dimming hopes that the waning summer holds another bout of above-normal temperatures, which would trigger additional cooling-related demand. Private forecaster MDA EarthSat said it expects above-normal temperatures through much of the West over the next six to 10 days, but cooler weather should prevail in the South during the same period.
Gas prices are likely to continue heading lower over the next several weeks as the market enters the so-called shoulder period, market watchers said. That's the period of typically sluggish demand between summer, when gas-fueled cooling needs rise, and winter, when heating needs take over.
"You have a market that doesn't have much in the way of bullish elements over the next several months," said Cameron Horwitz, analyst at Canaccord Genuity in Houston.
The well-supplied U.S. gas market is also likely to keep prices in check. Inland gas production remains at historically high levels. Prices could march 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.
"We have plenty of natural gas for available demand, which is not increasing," said Peter Beutel, who heads the trading advisory firm Cameron Hanover, in a research report. "A weak economy and poor employment prospects suggest that demand is likely to remain at existing levels without any major increase."
Still, market participants are monitoring a storm brewing in the South Atlantic, which could threaten Gulf Coast production if it escalates and heads into the Gulf production region.
The National Hurricane Center said a westward-moving formation of "cloudiness and thunderstorms" now has a 70% chance of becoming a tropical cyclone over the next 48 hours.
However, a Gulf Coast storm would threaten not just supply but also demand, meaning the net impact is likely to be small, Horwitz said.