US natural gas futures fall 1.7 percent on mild weather forecasts

US natural gas futures fell for a sixth time in the last seven trading days on Friday, losing 1.7 percent, on forecasts for cooler-than-normal weather over the next two weeks during what should be the hottest days of the year. Front-month gas futures on the CME NYMEX closed down 6.6 cents, or down 1.7 percent, at $3.781 per million British thermal units.
The August front-month has declined almost steadily since hitting a four-month high of $4.71 in mid June to an eight-month low of $3.74 on Thursday on worries about big stock builds and the lack of hot summer weather. August traded between $3.76 and $3.86 on Friday, keeping the contract in oversold territory for the 15th straight day, the longest in more than four years. The Relative Strength Index, eased to 23.8 from 28.1 on Thursday. An RSI under 30 is considered oversold.
Traders noted the 40-day moving average of $4.36 crossed below the 200-day of $4.38 for the first time in seven months. The front-month ended down 4 percent for the week, down 15 percent for the month and off 11 percent for the year. In early estimates, analysts forecast utilities would add about 94 billion cubic feet of gas to storage this week. That is just over the previous week's 90-bcf build and well over the 57-bcf build a year earlier and the 46-bcf five-year average for that week.
MDA Weather Services forecast cool weather will linger over the eastern two-thirds of the United States over the next 15 days. That was in line with US weather models also predicting cooler-than-normal temperatures over the next two weeks, with 172 cooling degree days, versus a normal of 201 for this time of year, according to Thomson Reuters Analytics.
On the NYMEX, the premium of front-month gas over spot Appalachian coal eased to $1.25 from $1.32 on Thursday. A gas premium over $2 makes it economic for utilities to burn coal. On the Intercontinental Exchange, next-day gas at the Henry Hub, the benchmark US supply point in Louisiana, lost a penny to average $3.79, matching an eight month low set Wednesday. Next-day New York gas lost about 20 cents to $2.36, while Chicago citygates lost two cents to $3.84 , an eight-month low, and the Southern California Border lost about six cents to $4.09, the lowest in seven months.