Natural gas futures traded near steady Monday, supported as traders viewed last week's declines to two-week lows as a good opportunity to buy, but under pressure as the market remains well supplied during spring's dip in demand for the heating and power-plant fuel.
Natural gas for June delivery recently traded 0.4 cent, or 0.1%, higher, at $4.239 a million British thermal units on the New York Mercantile Exchange.
The benchmark contract Friday ended at its lowest level in more than two weeks, as mild spring weather during the coming weeks was seen cutting demand. Futures were also under pressure from steep losses in crude oil and other commodities, and sank 9.5% on the week.
The declines spurred some buying early Monday, as did weather forecasts calling for an uptick in demand to power air conditioning in the U.S. south.
"The South may generate some real cooling demand in the next several days," said Mike Fitzpatrick, a partner with Kilduff Group, in a client note. "The warm weather will spread along the east coast into New York and New England by the middle of the month as high summer approaches."
Meteorologists with MDA EarthSat expect warmer-than-normal weather this week from Texas through Florida, and north toward the Great Lakes. Daily high temperatures near 90 degrees Fahrenheit are expected in Houston, Atlanta and St. Louis this week, the private forecaster said Monday.
Futures have also drawn support in recent weeks from a larger-than-normal amount of outages at nuclear power plants. Gas-fired power stations are frequently called upon to pick up the slack when nuclear plants go offline.
But analysts say futures remain pressured by the view that the market will remain well supplied during spring's dip in gas use.
The Energy Information Administration reported Thursday that 72 billion cubic feet of natural gas was added to storage during the week ended April 29, more than estimates for a 67-bcf gain in a Dow Jones Newswires survey.
Inventories on the week stood at 1.757 trillion cubic feet, 1% below the five-year average, and 11.4% below 2010 levels, but still a comfortable level of supply with robust production expected to continue.
The number of rigs drilling for natural gas in the U.S. rose by eight last week, to 890, Baker Hughes Inc. (BHI) said, the second consecutive week of gains.
"Gas drilling activity has remained stubbornly high over the past several months," analysts with Canaccord Genuity said Monday in a client note, "with [about] 30 net rigs coming out of the field since the start of the year despite a lackluster gas price environment."
Meanwhile, natural gas for next-day delivery at the benchmark Henry Hub in Louisiana recently traded at $4.26/MMBtu, according to IntercontinentalExchange, down 2 cents from Friday's average. Natural gas for Tuesday delivery at Transcontinental Zone 6 in New York traded at $4.50/MMBtu, little changed from Friday.