Natural gas retreats as U.S. temperatures moderate


Natural gas retreats as U.S. temperatures moderate

NEW YORK -- Natural gas futures fell sharply Monday, as updated weather forecasts call for cooler temperatures in August, signaling weakening gas demand following a sweltering July.

The drop of nearly 3% wiped out the bulk of last week's gains in the natural gas market. Analysts say the retreat is a sign that market participants are scanning the horizon toward the end of the summer and concluding that the most of the season's demand has passed.

"If these forecasts hold true, the hottest part of summer is probably in the rear-view mirror, which is probably a pretty bold statement to say in mid July," said Aaron Calder, analyst at Gelber & Associates in Houston.

Natural gas for August delivery settled 11.2 cents, or 3%, lower at $3.677/MMbtu on the New York Mercantile Exchange.

Sweltering temperatures across the Northeast over much of the last month have helped lift natural gas prices, as homes and businesses flipped on air conditioners and consumed more electricity generated from the fuel. The region is a major user of electricity derived from burning natural gas.

But projections for early August have swung the other direction. Private forecaster MDA called for below-normal temperatures in the Midwest and Northeast over the next six to 10 days. Its 11-to-15-day outlook says "seasonally cool conditions are likely to persist from the Midwest to the South, as well as along the Pacific Northwest coast."

The forecasts are helping to erase recent gains in the natural gas market. Futures surged 4% last week, after above-normal temperatures led to a smaller-than-expected draw from U.S. gas stockpiles.

This Thursday's report could also see a slim increase in inventories, as conditions remained hot across the Northeast last week. But analysts and traders say it could be the last week of modest inventory increases this summer as utilities reduce their consumption of the fuel.

Dow Jones Newswires

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