From the Wall Street Journal
Natural gas prices erased gains Monday after midday weather updates pulled back from hot forecasts that had stoked expectations for strong demand.
Natural gas for June delivery lost 0.7 cent, or 0.3%, to settle at $2.055 a million British thermal units on the New York Mercantile Exchange. The retreat from gains brought gas back to the middle of a 19-cent trading range it has settled in every session for a month.
The summer months often bring higher demand for gas-fired power to run air conditioners, which had helped push prices to a 10-day high in early trading. But Monday’s midday weather forecasts showed cooler temperatures in the southeast than the overnight updates showed, and that weakens demand expectations in the biggest region for gas-fired power, said Zane Curry, a gas analyst at Mobius Risk Group in Houston.
The gas market may need an extreme amount of heat to drive enough demand for air conditioning and gas-fired power to burn off a glut left over from winter, analysts have said. Storage levels as of May 13 hit 2.8 trillion cubic feet, 40% above levels from a year ago and 41% above the five-year average for the same week.
“Storage inventory is still extremely bloated,” Mr. Curry said. “So any time the market sees cool — below normal — temperatures in the southern tier of the country … then you’re going to have a tendency to push prices back to the bottom of the trading range.”
Overnight weather updates had shown the beginning of summer-like weather in large parts of the country. Futures jumped as soon as electronic markets opened Sunday evening, often a sign gas traders are reacting to weather updates.
