On the New York Mercantile Exchange, natural gas futures for delivery in September settled at USD2.740 per million British thermal units by close of trade on Friday. On Thursday, prices hit USD2.687 per million British thermal units, the lowest since June 28.
On the week, the front-month natural gas contract fell 1.6%, the fourth consecutive weekly decline.
Natural gas prices slumped to a seven-week low on Thursday, after a report from the U.S. Energy Information Administration showed U.S. gas supplies rose broadly in line with market expectations last week.
The U.S. Energy Information Administration said in its weekly supply report published Thursday that natural gas storage in the U.S. rose by 20 billion cubic feet last week, just below market expectations for a decline of 24 billion cubic feet.
Total U.S. gas supplies stood at 3.261 trillion cubic feet last week, 16% above last year’s level and 13% above the five-year average level for the week.
Market analysts have warned that without strong demand through the rest of the summer cooling season, gas inventories will reach the limits of available capacity later this year.
Stocks peaked last year in November at a record 3.852 trillion cubic feet.
The storage surplus to last year will have to be cut by at least another 150 billion cubic feet in the 15 weeks left before winter withdrawals begin to avoid breaching the government's 4.1 trillion cubic feet estimate of total capacity.
Early injection estimates for this week’s storage data range from 33 billion cubic feet to 52 billion cubic feet, compared to last year's build of 66 billion cubic feet. The five-year average change for the week is an increase of 53 billion cubic feet.
Meanwhile, updated weather forecasts Friday continued to predict milder weather across key parts in the U.S. over the next two weeks.
Industry weather group MDA EarthSat said temperatures in the Northeast were trending cooler, while the South, a key region for air conditioning, "remains seasonally cool."
Cooler summer temperatures reduce the need for gas-fired electricity to power air conditioning, dampening demand for natural gas.
Meanwhile, traders continued to monitor tropical storm activity in the Gulf of Mexico, amid concerns over a disruption to supplies from the region.
A tropical depression in the southwestern portion of the Gulf of Mexico has an 80% of developing into a tropical-cyclone in the next 48 hours.
Production in federal waters in the Gulf accounts for about 10% of natural-gas output, and prices typically spike when storms threaten production. The U.S. Atlantic hurricane season began on June 1 and ends November 30.
Natural gas futures also drew support from weekly production data from industry research group Baker Hughes, which showed the number of active rigs drilling for natural gas in the U.S. last week fell by 11 to 498, the lowest since 1999.
A bout of extreme heat across much of the U.S. over the past two months helped boost natural gas prices above the key USD3.00-level in recent weeks. Prices rallied to a 2012 high of USD3.275 per million British thermal units on July 31.
But futures have come under heavy selling pressure since the start of August, losing almost 15% after extended weather forecasts pointed to milder weather across most parts of the U.S. throughout most of the month.
Elsewhere in the energy complex, light sweet crude oil futures for October delivery traded at USD96.47 a barrel by close of trade on Friday, jumping 3.1% on the week.
Heating oil for September delivery rose 2.15% over the week to settle at USD3.092 per gallon by close of trade Friday.
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