US natural gas futures fell nearly 2 percent on Wednesday, losing ground for a third straight session on expectations of lower heating and cooling demand due to forecasts for near-normal temperatures over the next two weeks. On its last day of trading, May gas futures on the New York Mercantile Exchange settled down 3.7 cents, or 1.8 percent, to $2 per million British thermal units. It has fallen nearly 6.8 percent so far this week.
Meanwhile, the contract for June, which will be the front-month contract from tomorrow, settled little changed at $2.153. US utilities were expected to inject 70 billion cubic feet of natural gas into storage in the week ended April 22 on lower demand for heating, a Reuters survey of energy analysts showed on Wednesday. "The market is still modestly lower for the week as the latest weather forecasts are showing signs of getting milder and thus less supportive for late-period natgas heating demand," Dominick Chirichella, senior partner at the Energy Management Institute in New York, said in a note.
Both the US and the European weather models predicted near-normal weather for the next two weeks.
With stockpiles at record highs after a warm winter, analysts said prices would have to remain low through 2016 to pressure output cuts and encourage power generators to keep burning gas instead of coal.
The US power sector has burned about 24.1 billion cubic feet a day so far this year, up from 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 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 than usual.
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