US natural gas futures ended down 1 percent on Tuesday after a day of see-saw trading in which the market reacted to news of declining production and expectations of steady demand. Front-month gas futures on the New York Mercantile Exchange closed down 4 cents at $2.716 per million British thermal units.
Gas prices rose nearly 2 percent in early trade on forecast production cuts, but gave all that back and more by mid-morning, falling more than 2 percent, when oil futures were down almost 4 percent. The latest Global Forecast System weather model for the lower 48 US states called for mostly steady, near-normal temperatures over the next two weeks, with 201 population-weighted cooling degree days. That compared with Monday's forecast of 197 CDDs and a 30-year norm of 198 CDDs.
Thomson Reuters Analytics forecast consumption in the lower 48 would average 59.7 billion cubic feet per day over the next two weeks. That compared with Monday's forecast of 59.8 bcfd and a 30-year norm of 57.4 bcfd. While residential, commercial and industrial customers used near-normal amounts of gas for this time of year, power generators continued to burn much more because of its relatively low cost compared to coal.
Power generators were expected to use on average 31.8 bcfd of gas over the next two weeks, according to Thomson Reuters Analytics. That compared with 26.9 bcfd a year earlier and a 30-year norm of 29.0 bcfd. With coal futures remaining near 2007 lows, the premium of gas futures over coal remained above $1 per mmBtu for a 20th consecutive day for the first time since December, making it more likely some generators will burn coal instead of gas. Gas production in the lower 48 was expected to drop to 72.1 bcfd on Tuesday, the lowest since mid June, from 73.5 bcfd on Monday, according to Thomson Reuters Analytics.
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