Natural gas futures fell to a 10-month low Wednesday as moderating temperatures across the U.S. keep a lid on demand for heating and cooling.
Natural gas for October delivery settled down 6.8 cents, or 1.8%, to $3.730 a million British thermal units on the New York Mercantile Exchange, the lowest settlement since November.
The natural gas market is entering the autumn "shoulder season," a period of sluggish demand due to falling electricity consumption. Across the U.S., falling temperatures prompt consumers to turn off their air conditioners. But they likely won't be turning on the heat for several weeks.
"It's a triple punch here. We're seeing production rising to record levels, we're seeing demand at its lowest level for the year with temperatures dropping and tomorrow we've got storage coming in above 90," said Matt Smith, an analyst with Summit Energy.
The U.S. Energy Information Administration is expected to report that 91 billion cubic feet of gas was added to storage last week, according to a Dow Jones Newswires survey of analysts and traders. An injection of that size would be represent a larger increase than normal, due to mild weather limiting demand for heating and power plant fuel.
The EIA is scheduled to release its storage data at 10:30 a.m. EDT Thursday.
Elevated production and a relatively mild hurricane season pushed gas futures under the psychologically significant $4/MMBtu marker earlier this month and traders haven't looked back. Futures and are down 9% since the beginning of September.
Still, analysts said that prices are reaching levels low enough to discourage bets on a deeper drop. A bout of cold weather in the next couple weeks would likely bring a rebound, and traders are keeping one eye on the tropics for any potential disruptions to output.
"The real support as we get closer to November is the risk of an early onset of cold. That's going to prevent people from adding on much more to their short position," said Gene McGillian, a broker and analyst with Tradition Energy.
Tropical Storm Ophelia, the 15th named storm in the Atlantic this year, is strengthening as it moves westward over the tropical Atlantic with sustained winds increasing to 60 miles per hour, the National Hurricane Center said.