Natural gas futures edged higher Tuesday, recovering from five-month lows as traders continued to weigh the impact of Hurricane Irene on power outages and gas demand.
Natural gas for October delivery recently traded up 3.1 cents, or 0.8%, to $3.861 a million British thermal units on the New York Mercantile Exchange.
Futures recovered some ground following Monday's steep sell-off. Front-month gas futures fell to their lowest level since March after widespread power outages from Hurricane Irene trimmed the outlook for gas-driven electricity demand.
Monday's expiration of the cheaper September contract gave futures a slight boost overnight. Forecasts calling for cooling weather, however, capped the gains, as traders look ahead to cutbacks in air conditioning use.
"This week's trade is off to an unusually weak start with October futures posting new lows," said Jim Ritterbusch, head of the trading advisory firm Ritterbusch and Associates, in a research report.
Traders were still weighing the longer-term impact of Irene, which knocked out power to as many as 5.5 million homes and businesses. Bentek Energy said in a research note that the storm has so far reduced demand for natural gas on the East Coast by about 2.8 billion cubic feet.
Although parts of the southern U.S. continued to be hit with high temperatures and above-normal heat is forecast for parts of the Midwest this week, market participants have already begun to look past the peak summer cooling season and focus on the prospect of weakening demand this fall.
Unusually warm temperatures this summer kept a floor under natural gas prices, sending front-month futures as high as nearly $5 per million British thermal units in June. Prices have dropped sharply in recent weeks, however, as expectations of cooler temperatures ahead and signs of a weakening U.S. economic recovery weigh on the outlook for industrial demand.
"Traders suddenly felt autumn in the air and knew that the hot temperatures of summer would soon be behind us," said Peter Beutel, president of Cameron Hanover, a trading advisory firm.
Meanwhile, natural gas for next-day delivery at the benchmark Henry Hub in Louisiana recently traded at $3.9750/MMBtu, according to IntercontinentalExchange, up 4.5 cents from Monday's average. Natural gas for next-day delivery at Transcontinental Zone 6 in New York traded at $4.08/MMBtu, down 4 cents from Monday.