A forecast of cooling temperatures is cooling off natural gas futures, which recently fell to their lowest level in almost 11 months.

Commodity Weather Group LLC, a data analytics company based in Bethesda, Md., that provides short- and long-term weather analysis for energy futures, recently predicted cooler-than-normal temperatures across the U.S. Midwest, causing a drop in demand for the power-plant fuel.

Last month, natural gas for October delivery slipped 0.4 cents on the New York Mercantile Exchange to $3.701 per million British thermal units (Btu), the lowest settlement price since Oct. 27, 2010.

The spread between natural gas futures for delivery in Oct. 2011 and Jan. 2012 shrunk 2 cents to 45.8 cents. November $3.85 calls — bets that natural gas prices will rise — decreased 0.3 cents to 0.6 cents per million Btu on a volume of 200 lots, yet were the most active options in electronic trading.

Overall, natural gas fell 2.8 percent last week and, according to seven of 13 analysts surveyed by Bloomberg Businessweek, could fall even more by the end of this week if stockpiles remain sufficient.

According to Matt Rogers, President of Commodity Weather Group, the weather pattern for the U.S. and Southern Canada is “fairly benign” and is typical of weather patterns that result in reduced cooling demand by energy utility customers. In a note to clients, Rogers said that the eastern U.S. will see normal temperatures until Oct. 2.

A report by the U.S. Department of Energy released Sept. 22 showed that natural gas supplies for the week ending Sept. 16 increased 89 billion cubic feet — above the five-year average gain of 72 billion cubic feet — to 3.201 trillion cubic feet. The report also found that an existing shortfall to five-year average natural gas inventory levels fell to 1.1 percent from 1.6 percent the previous week.

The Energy Department’s monthly Short-Term Energy Outlook, released Sept. 7, states that marketed natural gas production will average 65.70 billion cubic feet a day this year, up from 61.83 billion in 2010.

According to Baker Hughes Inc., an oilfield services company based in Houston, Texas, the number of U.S. natural gas drilling rigs remained steady last week at 912.

Sources

“Natural Gas Falls for Fourth Day on Cooler Weather in Midwest,” Bloomberg Businessweek, Sept. 23, 2011.