US GAS: Futures End Lower On Supply Concerns Despite Hot Weather

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NEW YORK (Dow Jones)--Natural gas futures finished lower Tuesday, propelled by an abundance of supply despite hot weather in the major gas-consuming regions.

Natural gas for July delivery on the New York Mercantile Exchange settled 9.3 cents, or 2.14%, lower at $4.248 a million British thermal units after reaching a low of $4.239/MMBtu earlier in the day.

Gas futures slid Tuesday as concerns about a supply glut pressured prices. Surging supplies from onshore gas fields known as shales have led to sizeable injections of gas into underground storage facilities each week. Government data released last week showed that U.S. gas output rose for the third month in a row in March as producers continue to drill despite low prices.

"That production not only grew but also outstripped our own expectations speaks to continued high rig productivity and suggests that unless the rig count is pulled substantially lower ... production will continue to grow through the injection season," analysts with Barclays Capital in New York wrote in a note to clients Tuesday.

Total gas in U.S. storage as of May 21 was 2.269 trillion cubic feet, about 16.3% above the five-year average for the same week and 3.2% above last year's level for that week.

Rising gas production "is certainly pretty bearish" for the market, while demand for the fuel remains weak as the U.S. economy recovers, said Kent Bayazitoglu, an analyst with Gelber & Associates in Houston.

But forecasts of unusually hot weather in the eastern and central U.S. over the next three weeks were providing some support for gas prices Tuesday. The warm temperatures were expected to boost demand for natural gas to generate electricity for cooling.

Commodity Weather Group, a Bethesda, Md. private forecaster, was predicting above-normal temperatures in the South Central U.S., the Southwest and parts of the Plains region from June 6 to 10. CWG was expecting warmer-than-normal temperatures in the Mid-Atlantic, Southeast, Plains and South Central region from June 11 to 15.

Gas traders were also tracking predictions of an active hurricane season in the Atlantic basin this year. The National Oceanic and Atmospheric Administration's outlook points to a 70% probability of 14 to 23 named storms, including eight to 14 hurricanes and three to seven major hurricanes with winds of at least 111 miles per hour. The Atlantic hurricane season begins Tuesday.


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




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