NYMEX September gas futures settled 4.3 cents lower Friday to $3.798/MMBtu as the market continues to witness strong storage injections in light of cooler-than-normal weather in large parts of the US and continued supply growth.
"Natural gas remains well supplied with the May gross production number released yesterday showing a 6.2% year-over-year increase and storage injections running consistently above the five-year average benchmark rate," said Tim Evans, analyst at Citi Futures Perspective.
"However, the warming trend in the 11- to 15-day temperature forecast is at least something of a relative support within what remains a bearish fundamental trend," he added.
Aaron Calder, analyst at Gelber & Associates, also focused on the production report, adding that it "placed a damper on bullish enthusiasm."
"The current Northeast basis suggests, and the backward-looking production report confirms, that there is a ton of new production coming out of the Marcellus right now," Calder said.
He added that production numbers suggest "that the large injections will continue into the shoulder season despite natural gas' new advantageous positioning" at a lower price point.
"The window for meaningful demand is closing and while the weather forecasts offer hope, the market needs the heat to arrive before making a strong move as it has been burned once before," Calder said.
"Once we move into mid-September, there won't be enough demand on the market to make a dent in the surging production, and another 110-Bcf injection could be in the cards."
The contract traded Friday between $3.781/MMBtu and $3.877/MMBtu.
