The NYMEX August natural gas futures contract settled 9.8 cents lower at $4.357/MMBtu Wednesday as the market looked to another strong storage injection and milder weather forecasts for much of the US into mid-July. "Natural gas futures are heading lower today in response to long-range cooler weather forecasts," said Aaron Calder, senior market analyst at Gelber & Associates. "Surging production, which was expected, and extremely mild weather, which was not, is pushing the contract near its floor."
While near-term weather is expected to be hot and muggy in much of the country, WSI in its 11- to 15-day forecast expects above-average heat to be mostly confined to the West. "We do not favor any prolonged heat events across the central-eastern US," the private forecaster noted.
In addition, most analysts that Platts polled are expecting the US Energy Information Administration Thursday to report a storage injection in the 99-103 Bcf range for the week ended Friday -- well above both the 76 Bcf reported a year ago and the 68 Bcf five-year average. Such a build could mark the eighth triple-digit injection in a row, analysts noted.
"We're turning more bearish on this market," said Elaine Levin, president of brokerage PowerHouse. "Historically, the hottest day of the year happens in the next couple of weeks, and looking at the [weather] maps we're seeing some hot weather, but once again it will only be for a day or two. We just can't sustain it."
With storage "coming up at a pretty good clip and a lack of any sustained weather, it's making the bears happy," Levin added.
"Natural gas is seemingly in extra time -- on the ropes and defensively (fundamentally and technically) weak -- although summer's just begun," said independent analyst Jay Levine of Enerjay.
But "I remain confident ... that the downside in natural [gas] is limited and confident that there will be a series of days when summer heat will ignite another rally in natural [gas] before long," Levine said. "It might not happen today ... and it might not happen tomorrow, but it's gonna happen one of these days."
"Of course, I also thought that the US was going to win yesterday," Levine added.
The August contract traded Wednesday between $4.338/MMBtu and $4.459/MMBtu.
The NYMEX settlement is considered preliminary and subject to change until a final settlement price is posted at 7 pm EDT (2300 GMT).
