NEW YORK (TheStreet) -- A projected inventory jump and a downbeat industrial production report drove natural gas futures lower on Tuesday.
One of the biggest laggards among commodities, natural gas for June delivery recently was quoted off 3% to $4.188 per million British thermal units, erasing the previous day's gains, but narrowly avoiding Friday's low of $4.153.
"Futures fell to $4.16 in early trading, blowing off the carried-away buying we saw roll through yesterday's session on concerns from Friday's rig count report," a Gelber & Associates report said.
On Tuesday, the Federal Reserve said industrial production was flat in April compared with an increase of 0.7% in March. Analysts, on average, were expecting a 0.4% increase in April.
The lower-than-expected reading came as total vehicle assembly dropped, mainly because of parts shortages that resulted from the earthquake in Japan, the Federal Reserve said on Tuesday. However, it's worth noting that the lackluster report for April wasn't an isolated incident as industrial output for February was revised to a 0.3% decline. Previously it was reported to have edged up 0.1%.
The Federal Reserve also said that in April, manufacturing production fell 0.4% after rising for nine consecutive months.
"Still too early to call this one, but it's becoming a bit clearer that the continuation of manufacturing recovery sold to the public has neared its limits with the chokehold of higher commodity costs," the Gelber report said.
"This has been our message since before QE2 (the Fed's second round of quantitative easing) began last year. Industrial natural gas demand cannot easily keep growing this year as we slip into maintenance season."
The industrial sector was responsible for about 27% of all natural gas consumed in the United States last year, according to the U.S. Energy Information Administration.
Last week's mild weather is expected to yield the season's first natural gas stock injection above 80 billion cubic feet this week, the report said. However, cooling demand may increase next week as the weather gets hotter and air-conditioning usage increase - boosting natural gas demand.
Natural gas stocks were trading mixed. Kinder Morgan Energy Partners(KMP_) was falling 1.6% to $70.92, BP(BP_) was rising 0.4% to $42.63, Devon Energy(DVN_) was flat at $81.84, Newfield Exploration (NFX_) was down 0.3% at $69.54, Cheniere Energy Partners, L.P.(CQP_) was 0.8% higher at $16.98, Cheniere Energy, Inc.(LNG_) was losing 2.1% to $7.56 and EOG Resources (EOG_) was up 1% at $105.75.
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