Natural gas futures ended nearly flat Wednesday, holding near the $4 level, as traders weighed increasing storm activity in the Atlantic against the looming seasonal slowdown in gas demand.
Natural gas for October delivery settled 0.2 cent higher, at $3.940 a million British thermal units on the New York Mercantile Exchange, after trading as high as $4.038/mmBtu earlier in the session.
After a midday rally, futures handed back gains as investors start to factor in the period of slow demand following the summer months. As energy consumers in the U.S. turn off air conditioners and cut their use of gas-fired electricity, futures tend to slump until cold weather brings heating demand.
"We're at a time in the season where we are maximizing inputs into the ground," said Stephen Schork, head of trading-advisory Schork Group. "We're probably in for another soft patch in prices."
The U.S. Energy Information Administration is expected to report that 65 billion cubic feet of gas was added to storage last week, according to the average estimate of 14 analysts surveyed by Dow Jones Newswires.
The report, which is forecast to show a slightly lower-than-average injection, is scheduled for release at 10:30 a.m. EDT Thursday.
Futures are still holding close to the $4 level, which has been a pivot point for trading for more than a month.
Meanwhile, the National Hurricane Center is currently tracking two weather systems that could stifle output in the Gulf of Mexico.
Early Wednesday, the NHC upgraded a tropical depression to Tropical Storm Maria, the 13th named storm of the 2011 hurricane season. The storm is moving across the Atlantic with sustained winds near 50 miles per hour, and some strengthening is possible over the next two days.
An area of low pressure in the southwestern Gulf "is showing some signs of organization" and has a 70% chance of forming into a tropical cyclone in the next two days, the NHC said.
Gas production in the Gulf of Mexico is still returning after the shutdowns due to Tropical Storm Lee, though analysts said storms have a smaller effect on the overall natural gas market than in the past.
The Gulf accounts for just 7% of total U.S. production, down from 17% in 2008, according to the U.S. Energy Information Administration, as U.S. output has shifted to areas on land.
FUTURES SETTLEMENT NET CHANGE Nymex Oct $3.940 +0.2c Nymex Nov $4.045 +0.2c Nymex Dec $4.251 -0.8c CASH HUB RANGE PREVIOUS DAY Henry Hub $3.895-$3.983 $3.93-$4.06 Transco 65 $3.875-$3.995 $3.935-$4.01 Tex East M3 $4.10-$4.228 $4.16-$4.25 Transco Z6 $4.13-$4.23 $4.17-$4.235 SoCal $4.22-$4.29 $4.20-$4.30 El Paso Perm $3.75-$3.80 $3.81-$3.95 El Paso SJ $3.72-$3.77 $3.76-$3.80 Waha $3.78-$3.87 $3.83-$3.90 Katy $3.86-$3.95 $3.90-$3.96