US natural gas futures fall seven percent

US natural gas futures fell for a fourth day in a row on Friday, losing about 7 percent for the week, on forecasts for moderating weather and expectations for continued bigger-than-normal storage builds. The weekly loss was the biggest since February. Front-month gas futures on the New York Mercantile Exchange closed down 2.6 cents, or down 0.7 percent, at $3.793 per million British thermal units on Friday.
The October front-month traded between $3.78, the lowest since mid August, and $3.85. The front-month also ended down 7 percent for the month and 10 percent for the year. Shares in the United States Gas Fund, an exchange traded fund that tracks Henry Hub gas prices, fell to $20.62 on Friday, the lowest since July and close to an eight-month low. Analysts estimated utilities added about 78 billion cubic feet of gas into storage this week, near last week's 79-bcf injection, but well over the 64 bcf build in the same week a year ago and the 60 bcf five-year average build.
MDA Weather Services forecast above-normal temperatures on the East Coast over the next five days before much cooler air blankets the mid-continent for the subsequent six to 15 days. US weather models predicted a return to near normal temperatures over the next two weeks with just 128 cooling degree days, down from 140 on Thursday, versus a normal of 126 for this time of year, according to Thomson Reuters Analytics.
On the NYMEX, spot Appalachian coal prices dropped over 40 cents to $56.50 per ton, the lowest in seven months. The premium of the front-month gas contract over spot Appalachian coal eased to $1.44 from $1.46 per mmBtu on Thursday. A gas premium over $1.50 makes it cost-effective for some utilities to burn coal.
On the IntercontinentalExchange, next-day gas at the Henry Hub, the benchmark supply point in Louisiana, lost six cents to average $3.84, while New York dropped about 66 cents to $2.10. Next-day gas at the Chicago citygates lost six cents to average $3.86, while the Southern California Border lost eight cents to $4.01. In power markets, the Mid Columbia hub in the Pacific Northwest lost $1 to average $38 per megawatt hour, while PJM West in the Mid-Atlantic lost $13 to $37. The US National Hurricane Center said a low pressure system near the Cape Verde Islands had a 30 percent chance of strengthening into a tropical depression over the next five days.