US natural gas futures closed below $4 for the first time in seven months after government data showed stockpiles of the fuel continued to rise more quickly than expected, erasing fears of a supply shortfall ahead of next winter. US gas inventories rose 107 billion cubic feet last week, according to a weekly report from the Energy Information Administration, much bigger than the 98 bcf anticipated by analysts in a Reuters poll.
The stockpile build was above the five-year average for the 13th week running. It was much greater than the previous week's 93 bcf and the 62 bcf of a year earlier. "The market has consistently underestimated the weekly storage numbers," said natural gas analyst Teri Viswanath of BNP Paribas in New York. "We have these very strong injections that continue, while the cooling demand has not materialized."
Front-month gas futures on the New York Mercantile Exchange settled down 16.5 cents, or 4 percent, at $3.954 per million British thermal units, for the lowest close since December 4. The session low was $3.94, the lowest intraday price since December 2. Following a brutal winter that drained stockpiles to the lowest level in a decade, traders and analysts were worried that inventories would not be filled sufficiently ahead of next winter.
But gas prices have declined 19 percent over the past month, falling from a high of $4.89 on June 16, as moderate temperatures and slower demand for air conditioning have allowed utilities to build inventories faster than normal. The front-month traded down about 4 percent for the week and 11 percent for the month. For the year, it was off 6 percent. Weather forecasts for the next six to 10 days showed higher temperatures in the Southwest and the Rockies and then in the East. This could result in greater gas usage for cooling.
For the next two weeks, US weather models show near-normal temperatures, with 194 cooling degree days, up from 192 on Wednesday, but lower than the normal 202 for this time of year, according to Thomson Reuters Analytics. Front-month gas for August remained in oversold territory for the ninth consecutive day, the longest in almost a year, according to the Relative Strength Index. The RSI fell to 18.5 from Tuesday's 28.8. An RSI below 30 indicates an oversold market.
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