Natural gas futures fell to their lowest levels in more than two weeks as a lack of storm threats to Gulf of Mexico production put the focus back on high U.S. stockpiles.
Natural gas for October delivery settled down 8.1 cents, or 2.1%, at $3.800 per million British thermal units on the New York Mercantile Exchange, the lowest ending price since Sept. 9. The October contract's last trading day is Tuesday. Most-active November gas fell 2.3%, to $3.916/MMBtu.
Tropical storms are not seen hitting U.S. gas production areas in the Gulf this week. The energy-rich region is home to about 11% of U.S. gas production, and prices have been supported at times this month when storms seemed poised to threaten production infrastructure.
"Little to no threat potential [is] seen for the U.S. energy production infrastructure across the western and central Gulf" in the next week to 10 days, said Jim Rouiller, senior energy meteorologist at Planalytics, in a weekly forecast.
With the Gulf free of storm activity, gas futures could continue to probe lower, said Fain Shaffer, president of InfinityTrading.com.
"We're going to see more weather premium come" out of the market, he said.
As no serious production outages are expected in the near future, traders are focused on high U.S. inventories. The amount of gas in U.S. storage as of Sept. 17 was 6.2% above the five-year average, the Energy Information Administration said Thursday. The ongoing supply overhang sent prices lower this summer despite high demand for gas-fired electricity.
Gas futures typically hit a seasonal bottom in August or September, as temperate weather reduces cooling demand and winter's gas heating needs are still months away.
ConocoPhillips (COP) Chief Executive Jim Mulva said Monday that the company had shut in some of its U.S. and Canada natural gas production because of low prices.
"There's a small amount of production we've shut in," Mulva told reporters on the sidelines of a conference in Houston. "We'd rather keep it in the ground for when it will have a greater financial impact."
Mulva said natural gas should rebound to between $6 to $7 per million British thermal units in the long term, prices that he said would make the fuel more attractive to develop than renewable energy sources or coal.