Natural gas futures rebounded Monday following steep declines last week, as weather forecasts suggested a bout of late-season cooling demand may be on the horizon.
Natural gas for October delivery recently traded up 7.4 cents, or 2%, to $3.775 per million British thermal units on the New York Mercantile Exchange.
Futures jumped on a surge in buying interest, after last week's market-wide rout sent the front-month contract falling 2.8%. The October contract hit an 11-month low of $3.662 a million British thermal units on Thursday.
Additional demand in the coming days could come from Texas and the Southwest, where above-normal temperatures should trigger some late-season cooling needs, according to Commodities Weather Group. Early heating demand in the Midwest and East Coast could also trigger demand, the private forecaster said.
Still, the rally is likely to be short-lived, according to analysts. Barring a sustained surge in temperatures or a Gulf-Coast hurricane, gas futures are likely to see additional declines in the coming weeks as the market enters the so-called shoulder season, the period of sluggish demand as summer gas-fueled cooling needs wane but winter heating demand has yet to kick in.
"I think the market really is biased to the short side," said Gene McGillian, analyst and broker at Tradition Energy in Stamford, Conn. "You still have four more weeks of shoulder-season weather."
Doubts about the U.S. economic recovery are weighing on expectations of natural gas demand among industrial users. And elevated production in the mid-continent has left market participants little concerned about supply shortages. Last week, the Energy Information Administration said natural gas inventories rose by 89 billion cubic feet during the week ended Sept. 16.
"Recent downward revisions in U.S. GDP, especially for the second half of 2011, will translate to some weakening in natural gas demand," Jim Ritterbusch, head of the trading advisory firm Ritterbusch and Associates, said in a research report.
Meanwhile, natural gas for next-day delivery at the benchmark Henry Hub in Louisiana recently traded at $3.87/MMBtu, according to IntercontinentalExchange, up 13.4 cents from Friday's average. Natural gas for next-day delivery at Transcontinental Zone 6 in New York traded at $4.18/MMBtu, up 26.6 cents from Friday.