U.S. GAS : Futures Sink for Fifth Day Ahead of Survey
09/19/2012| 03:53pm US/Eastern
--Natural-gas futures slump for fifth straight session
--Below-average temperatures seen in Midwest, curbing cooling demand
--Storage injection of 67 bcf seen in EIA survey
(Adds new details in fifth through 12th paragraphs.)
By Dan Strumpf
NEW YORK--Natural-gas futures finished lower for the fifth straight session Wednesday, as cooling temperatures across the U.S. continue to damp demand.
Natural gas for October delivery settled 1.1 cents, or 0.4%, lower at $2.762 a million British thermal units on the New York Mercantile Exchange.
Futures have fallen every day for a week, as traders look ahead to falling demand through the so-called shoulder season, the period that straddles the peak summer and winter demand months.
"It was an extremely hot summer, but now demand's going to wane," said Rich Ilczyszyn, chief market strategist at iiTrader in Chicago.
Weather forecasts are calling for below-average temperatures in parts of the Midwest, signaling that demand for cooling is likely to continue to ease there.
The unusually hot summer boosted demand for cooling--which in turn ratchets up demand for natural gas by leading to increased demand for electricity fired by natural gas--helping to propel gas prices above $3 for much of the summer.
The lift in demand helped to ease a massive U.S. inventory overhang that had previously been weighing on the market. The U.S. concluded the weak demand season with about 60% more gas in storage than the previous year, as the mild winter curbed gas-fired heating needs and record gas production kept supplies abundant. Now, stockpiles are about 11% above the year-ago level.
Additional cues on U.S. supply and demand are expected from Thursday's inventory survey from the Energy Information Administration. Analysts and traders expect inventories rose 67 billion cubic feet last week, on average, according to a survey by Dow Jones Newswires.
That's below last year's 89-bcf injection for the same week and below the five-year average build of 73 bcf for that week.
If the storage estimate is correct, inventories as of Sept. 14 will total 3.495 trillion cubic feet, about 9% above the five-year average and 10% above last year's level for the same week.
Futures began the day higher Wednesday, rising as high as $2.855/MMBtu. But prices reversed course as traders grew increasingly cautious of laying big positions ahead of Thursday's inventory survey, market participants said.
"The market's not going to do too much until tomorrow and the number comes out," said Victor Zevallos, natural-gas trader at INTL Hencorp Futures in Miami.
Write to Dan Strumpf at email@example.com
Corrections & Amplifications
This article was corrected at 4:09 p.m. EDT because the latest week's five-year average build of 73 billion cubic feet of natural gas was incorrectly referred to as a draw in the ninth paragraph.
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