US GAS: Futures End Lower On Profit-Taking, Weather Forecasts

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NEW YORK (Dow Jones)--Natural-gas futures finished lower Tuesday, driven by profit-taking and revised weather forecasts pointing to cooler temperatures in the central U.S.

Natural gas for July delivery on the New York Mercantile Exchange settled 10.8 cents lower, or 2.2%, at $4.808 a million British thermal units after reaching a low of $4.747/MMBtu earlier in the day.

Traders sold contracts to take advantage of low prices after futures reached $4.995/MMBtu on Tuesday, the highest price since Feb. 19. Gas futures had been bolstered by hot weather and predictions of an active hurricane season in the Atlantic. The U.S. Energy Information Administration forecasted in its Short-Term Energy Outlook on Tuesday that 166 billion cubic feet of gas production would be lost this year as a result of storm activity, compared with 19 bcf last year.

"We ran up 18% on the prompt-month contract [over the past two weeks], which is probably worth a bit of profit-taking," said Matt Smith, a commodity analyst with Summit Energy in Louisville, Ky.

Weather forecasts showing milder weather in the central U.S. over the next three weeks were also pressuring gas prices lower Tuesday. The moderate temperatures were expected to reduce the demand for natural gas to generate electricity for cooling.

MDA EarthSat, a Rockville, Md., private forecaster, was predicting normal or below-normal temperatures in most of the West, the northern Midwest and Northeast from June 13 to June 17. MDA was forecasting normal or cooler-than-normal temperatures across much of the central U.S. and parts of the West from June 18 to June 22.

As a warm weather pattern weakens in the Midwest and Mid-Atlantic next week, "temperatures will trend cooler, with most of the Midwest and Northeast expected to fall to at least normal, if not below, for a couple days around mid period," MDA forecasters wrote in a note to clients Tuesday.

But gas futures are likely to retest the key $5/MMBtu level later this week or next week as traders continue to anticipate hot summer weather and an intense hurricane season, Summit Energy's Smith said. Early analyst estimates point to a smaller-than-normal injection into U.S. gas storage because of warm weather in the major gas-consuming regions. The EIA will release the gas storage data on Thursday.

"The storage number next week should be below the benchmark, which should encourage prices up a bit, Smith said.


-By Christine Buurma, Dow Jones Newswires; 212-416-2143; christine.buurma@dowjones.com




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