Natural-gas futures edged lower Thursday, as traders awaited weekly storage data expected to show a smaller-than-average increase in U.S. inventories.
Natural gas for August delivery recently fell 4.1 cents, or 0.9%, to $4.362 a million British thermal units on the New York Mercantile Exchange.
Futures had risen in the previous four sessions to settle Wednesday near a one-month high, as hot weather persisted in the eastern half of the country. Above-normal temperatures remaining in the central part of the country weren't enough to hold the price above $4.40, however, as futures pared gains overnight.
Natural gas fell on "some apparent profit taking" ahead of the Energy Information Administration's weekly storage report, said Jim Ritterbusch, head of trading advisory firm Ritterbusch & Associates, in a client note.
The Department of Energy's report, due at 10:30 a.m. EDT, is expected to show an inventory build of 76 billion cubic feet, on average, during the week ended July 8, according to analysts surveyed by Dow Jones Newswires. That is below last year's 78-bcf injection and the five-year average build of 88 bcf.
"We feel that a build below our expected 75 bcf figure could trigger a further bout of fund short covering capable of pushing nearby values to a $4.50 area in short order," Ritterbusch wrote.
Injections below predictions often lift prices, while those that exceed expectations typically push prices lower. Last week, futures plunged as the EIA reported a larger-than-expected 95-bcf build.
With futures recently trading about a nickel lower, Stephen Schork, president of the Schork Group, said he expects prices to stay around this level until the inventory data gives the market cause to buy or sell.
Schork said he thinks the weekly injection will be lower than expected, a bullish signal for the market.
Eastern states also have some relief from the heat wave Thursday, which could be pressuring futures lower.
"It looks like the weather has certainly dissipated," Schork said, describing Thursday's morning temperatures in the Mid-Atlantic as more like late September's.
Next week the Northeast is predicted to see a cool down before turning hotter later in the week, according to MDA EarthSat Weather. Extreme heat is expected to "dominate" the Midwest for much of the six-to 10-day forecast, the private forecaster said.
Demand for natural gas tends to increase in the summer as temperatures rise, as the fuel is used to generate electricity to power air-conditioning.
Meanwhile, natural gas for next-day delivery at the benchmark Henry Hub in Louisiana recently traded at $4.41/MMBtu, according to IntercontinentalExchange, down 2.16 cents from Wednesday's average. Natural gas for Friday delivery at Transcontinental Zone 6 in New York traded at $4.69/MMBtu, down 7.04 cents from the average a day earlier.