US natural gas futures settled 3 percent lower on Monday after marking a more than three-week low on forecasts for lower than expected cooling demand over the next couple of weeks amid a steady rise in production. Front-month gas futures for November delivery on the New York Mercantile Exchange fell 9.1 cents or 3.0 percent to settle at $2.916 per million British thermal units. Prices touched a session low of $2.889, the weakest since September 8.
"It's a question of weather support going into November. There is a risk of mild temperatures limiting heating and cooling demand in the short term," Daniel Myers, market analyst at Gelber & Associates in Houston, said. While above-normal temperatures were expected through the first half of October, according to a US weather model, they were lower than earlier projection which was seen hurting gas demand for air conditioning.
"Selling impetus appeared inspired by mild updates to the short term temperature views that are now stretching into the third week of this month," Jim Ritterbusch, president of Chicago-based energy advisory firm Ritterbusch & Associates, said in a note. The market also appeared to have experienced some downward pull from the hard selloff across the petroleum complex, he added.
Oil fell more than $1 a barrel to below $56 on Monday as a rise in US drilling and higher Opec output put the brakes on a rally that helped prices to register their biggest third-quarter gain in 13 years. US natural gas speculators cut their net long positions for the first time in four weeks in the week ended September 26 on forecasts for a possible third consecutive warmer-than-normal winter and a slow but steady increase in production.
Production in the lower 48 US states rose to an average 74.2 bcfd over the past 30 days, up from 70.8 bcfd a year earlier. That was just short of the 74.3 bcfd during the same period in 2015, when output was at a record high, Thomson Reuters data showed. Thomson Reuters projected US gas consumption would fall from 74.3 billion cubic feet per day last week to 68.6 bcfd this week before recovering to 71.7 bcfd in the week after.
Early estimates showed utilities likely injected 62 bcf of gas into storage in the week ended September 29. That compares with a build of 76 bcf for the same week last year and a five-year average for the week of 91 bcf. If correct, total stocks would rise to 3.528 trillion cubic feet (tcf). That would put inventories nearly 4 percent below the same week a year ago and nearly at par with the five-year average for the week.