Natural gas slips on supply overhang

Natural gas futures traded down Wednesday, sliding away from seven-month highs hit earlier in the week, after Tuesday’s data indicated natural gas output rose in May added to concerns over a supply overhang.
On the New York Mercantile Exchange, natural gas futures for delivery in September traded at USD3.360 per million British thermal units during early U.S. trade, down 1.67%.
Prices fell to a session low of USD3.137 per million British thermal units earlier in the session, down 2.84%.
Pushing prices lower, the Energy Information Administration said natural-gas output averaged 72.39 billion cubic feet, in May, the highest level since January and 4.3% higher than in the same month last year. Month-on-month, output rose 0.7% in May from the previous month.
The data disappointed market expectations for a decline in output after storage levels rose to 60% above the five-year average earlier this year.
Mild winter weather cut demand for natural gas to heat homes and businesses, sparking fears that supplies would exceed available storage capacity by the end of the year.
Prices remained supported as forecasts for higher-than-average temperatures across much of the U.S. boosted the outlook for increased gas-powered electricity consumption.
Warmer-than-normal temperatures increase the need for gas-fired electricity to power air conditioning, boosting demand for natural gas. Natural gas accounts for about a quarter of U.S. electricity generation.
A bout of hot weather across the U.S. over the past several weeks has prompted power generators to burn more of the fuel to meet demand, easing a storage glut.
Elsewhere on the NYMEX, light sweet crude oil futures for delivery in September was up 0.84% to USD88.80 a barrel.