US natural gas futures fell nearly 4 percent on Monday, retreating from two-month highs earlier in the day, on forecasts for slightly warmer-than-usual weather. Front-month natural gas futures on the New York Mercantile Exchange settled down 7.7 cents, or 3.6 percent, at $2.06 per million British thermal units. It earlier touched a session high of $2.176, a peak since early February.
"Today's 13 cent selloff after posting 10-week highs at the start of the week is suggesting some buying exhaustion as well as the likelihood that production slippage and some cooler temperature trends have been largely baked in," Jim Ritterbusch, president of Chicago-based energy advisory firm Ritterbusch & Associates, said in a note.
Both US and European weather models point to slightly above-normal temperatures over the next two weeks, expected to keep heating demand in check for this time of year. With stockpiles at record highs after a warm winter, analysts said prices would have to remain low in 2016 to pressure producers to cut output and encourage power generators to keep burning gas instead of coal.
The US power sector is already doing its part to mop up the cheap gas supplies, burning about 24.1 billion cubic feet a day so far this year versus 22.9 bcfd a year earlier, according to Thomson Reuters Analytics. Power generators used record-high amounts of gas in 2015 and were expected to use even more this year, according to federal estimates.
US drillers have cut dry gas output in the lower 48 states, producing just 72.9 bcfd on average so far this year versus a record high of 73.5 bcfd for all of 2015.
Thomson Reuters Analytics forecast the summer would be a little warmer than last year, with July about 14 percent warmer than the 30-year normal and August warmer by 8 percent. Meteorologists expect the upcoming hurricane season to be more active than the quiet 2015, but are mixed on whether there will be more storms this year than usual.
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