Natural gas futures fell Friday as market participants bet that mild weather in the coming weeks would curb demand for the heating and power-plant fuel.
Natural gas for June delivery recently traded 2.4 cents, or 0.6%, lower, at $4.170 a million British thermal units on the New York Mercantile Exchange.
Futures rose slightly Thursday, supported by a smaller-than-average weekly build in U.S. inventories, but futures are still down 10.7% this month through Thursday's close.
A burst of early-season air conditioning demand and outages at nuclear plants increased power-sector gas demand in April, but that support faded this month. Nuclear plants that were offline for maintenance have been returning to service, easing need to run the gas-fired power stations that had picked up the slack.
The weather outlook has also turned bearish for the gas market, with comfortable weather in the North seen leaving little demand for heating, and only inconsistent air conditioning needs in the south.
"We expect the recent transitory effects (weather, nuclear outages) that drove the strength in April gas prices to fade over the next several weeks, revealing a still meaningfully oversupplied market," analysts with Canaccord Genuity said in a research note.
The Energy Information Administration said Thursday that U.S. gas stockpiles rose by 70 billion cubic feet last week, equal to the average estimate in a Dow Jones Newswires survey and short of the 90-bcf average build on the week. Inventories as of May 6 stood at 1.827 trillion cubic feet, 2% below the five-year average, and 12% below 2010 levels.
The EIA said this week that though gas in storage is near average, high production and less demand than was seen during last year's unusually hot summer should push supplies to a record 3.9 trillion cubic feet by the end of October.
Domestic stockpiles reached a record high of 3.84 trillion cubic feet last November.
"You're really back at a stalemate point," said Jay Levine, president of brokerage Enerjay LLC. "The forecasts are not encouraging for price support, yet natural gas has fallen back to levels that appear to be supportive."
Meanwhile, natural gas for next-day delivery at the benchmark Henry Hub in Louisiana recently traded at $4.09/MMBtu, according to IntercontinentalExchange, little changed from Thursday's average. Natural gas for delivery through Monday at Transcontinental Zone 6 in New York traded at $4.29/MMBtu, down 6 cents from Thursday.