Weaker oil, bearish weather view drive US natgas futures to more than two-week low

NEW YORK: U.S. natural gas futures hit a more than two-week low on Monday, in step with a sharp oil price drop, and as weather forecasts pointed to cooler temperatures for the rest of June.

Front-month gas futures for July delivery on the New York Mercantile Exchange were 0.89 cent, or 0.3%, lower at $3.11 per million British thermal units at 9:55 a.m. ET. During the session, the contract fell to its lowest level since May 27.

“Spillover from the plunge in oil prices is weighing on nearby futures,” Ritterbusch & Associates said in a note.

Oil prices slipped to a three-month low after U.S. President Donald Trump and Iran’s deputy foreign minister said they had reached an initial deal to end the war and resume traffic through the Strait of Hormuz.

“Cool weather expectations are now being stretched toward the end of this month with the total of summer cooling degree days now reducing the possibility of a major decline in the current supply surplus of about 150 bcf,” Ritterbusch added.

Cooling Degree Days (CDDs), which measure energy demand to cool buildings, stood at 179, below the number on Friday.

Financial firm LSEG projected average gas demand in the Lower 48 states, including exports, would fall from 104.1 bcfd this week to 103.3 bcfd next week.

Dutch and British natural gas contracts fell around 5% on the Iran war news, but the timing of how quickly Gulf production can recover remains unclear.