Houston — The NYMEX September natural gas futures contract fell Friday on expectations that moderating temperatures in the coming weeks may result in higher storage injections.
As of 12:00 pm EDT (1600 GMT), the front-month contract was trading 3.2 cents lower at $2.932/MMBtu after wandering between $2.927/MMBtu and $2.979/MMBtu so far in the session.
"The market is pulling back a little bit as the market expects temperatures to moderate," said IAF Advisors analyst Kyle Cooper.
That said, the US National Weather Service expects milder temperatures in much of the western US over the next six to 10 days while warmer-than-average temperatures are forecast for the rest of the country. Looking ahead, the September outlook shows warmer-than-normal conditions for much of the US.
High production levels are also contributing to the resistance to a move to the upside. This despite the fact that nationwide gas stocks sat at 2.435 Tcf in the week that ended August 17, a 19.7% deficit to the five-year average of 3.034 Tcf, according to US Energy Information Administration data.
US dry gas production averaged 82.4 Bcf/d over the past seven days, according to S&P Global Platts Analytics data. Output is forecast to maintain this level over the next two weeks, the data show. So far in August, production averaged 81.7 Bcf/d, up 9.1 Bcf/d from the year-ago level of 72.6 Bcf/d.
On the demand side, a 800 MMcf day-on-day climb was mainly driven by rising power burn in the Northeast and Midcontinent production areas, Platts Analytics data showed. But this consumption increase was somewhat offset by lower Southeast demand. Total demand stood at 76.1 Bcf Friday, up 400 MMcf day on day. Demand is estimated to pick up and average 79.4 Bcf/d over the next seven days.
As production growth continues to offset the rise in demand, prices may continue to remain suppressed, according to observers.
"At this point, I do not see many factors moving prices that much," Cooper said.
