Natural-gas futures slid to their lowest levels in almost six weeks Thursday after the largest weekly U.S. inventory build so far this year added pressure to the well-supplied market.
Natural gas for June delivery settled 10.4 cents, or 2.5%, lower, at $4.094 a million British thermal units on the New York Mercantile Exchange, the lowest ending price since April 8.
The Energy Information Administration said U.S. gas stockpiles rose by 92 billion cubic feet last week, slightly above the 89-bcf average estimate of gas analysts and traders in a Dow Jones Newswires survey.
Weekly inventory builds so far this year have been below average because of increased power-sector gas demand. But as nuclear power plants come out of their seasonal maintenance cycle this month and mild spring weather limits overall electricity demand, some analysts expect the size of gas inventory builds to rise during the coming weeks.
The market is also under pressure from the view that robust U.S. production will continue this year, quickly refilling inventories and depressing prices. The EIA said this month that it expects domestic natural-gas stockpiles to reach 3.9 tcf at the end of injection season in October, surpassing the record high of 3.84 tcf reached last year.
"We haven't seen the lows yet" in gas prices this season, said Ed Kennedy, a senior vice president of energy trading at INTL Hencorp Futures.
But Kennedy said the willingness of gas consumers to buy on dips below the $4 mark would likely keep the market in the narrow range it has been bound in for much of the last two years.
"You're not going anywhere," he said. "The market is adequately priced."
The benchmark gas contract has spent the past two weeks in choppy, indecisive trading as a neutral weather outlook gave traders little direction. Futures ended higher Wednesday, supported by forecasts for warm weather expected to increase demand for gas to power air conditioning.
Temperatures this week should be higher than normal from the Gulf Coast through the upper Midwest and parts of the Northeast, meteorologists with private forecaster MDA EarthSat said Thursday. The warmth is seen lingering through next weekend along the East Coast, but traders said temperate weather expected elsewhere limited the boost to gas demand.
Last week's injection came in larger than last year's 78-bcf build and the five-year average increase of 91 bcf on the week. Inventories as of May 13 stood at 1.919 trillion cubic feet, 1.8% below the five-year average, and 10.9% below 2010 levels.
FUTURES SETTLEMENT NET CHANGE Nymex June $4.094 -10.4c Nymex July $4.161 -10.5c Nymex August $4.214 -10.2c CASH HUB RANGE PREVIOUS DAY Henry Hub $4.00-$4.11 $4.07-$4.17 Transco 65 $4.05-$4.10 $4.12-$4.15 Tex East M3 $4.35-$4.44 $4.40-$4.45 Transco Z6 $4.38-$4.49 $4.42-$4.46 SoCal $4.08-$4.20 $4.18-$4.26 El Paso Perm $3.94-$3.98 $4.00-$4.05 El Paso SJ $3.89-$3.94 $3.90-$4.00 Waha $3.95-$4.02 $4.04-$4.07 Katy $4.02-$4.05 $4.08-$4.12