Gas Drops to 11-Month Low After U.S. Supplies Increase More Than Predicted

Natural gas futures fell to an 11- month low after an Energy Department report today showed that U.S. stockpiles rose more than forecast last week.

Gas supplies gained 40 billion cubic feet in the week ended Aug. 20 to 3.052 trillion, the report showed. Analyst estimates compiled by Bloomberg showed an increase of 38 billion, as did a separate survey of Bloomberg users. The price decline was exaggerated by technical trading signals, said Guy Gleichmann, the president of WaveLength Energy in Pompano Beach, Florida.

“This selling is overkill,” Gleichmann said. “It’s happening against a backdrop of bad price charts and weak economic data.”

Natural gas for September delivery dropped 5.4 cents, or 1.4 percent, $3.817 per million British thermal units, the lowest settlement price since Sept. 28. Gas prices have declined 7.3 percent this week. Gas futures have been trading below the 100-day moving average since Aug. 9.

Last week’s storage increase was smaller than the five-year average gain of 59 billion, department data showed. A surplus to the five-year average narrowed to 6.2 percent from 7 percent the previous week. A deficit to year-earlier supplies widened to 6.1 percent from 5.8 percent.

U.S. gas inventories at the end of October will reach 3.752 trillion cubic feet, the Energy Department said in its monthly Short-Term Energy Outlook on Aug. 10. Stockpiles rose to a record 3.837 trillion last November.

Drilling for Gas

The number of rigs drilling for natural gas in the U.S. fell by seven to 985 last week, according to data from oil-field service company Baker Hughes Inc.

Few storms have emerged to disrupt gas pipelines and platforms in the Gulf of Mexico. The National Oceanic and Atmospheric Administration earlier this month reduced its 2010 Atlantic hurricane forecast to 14 to 20 named storms from an earlier estimate of 14 to 23.

Hurricane Danielle and Tropical Storm Earl in the Atlantic Ocean will probably bypass the Gulf, according to Weather Underground. A low-pressure system in the Gulf of Mexico is unlikely to intensify into a tropical cyclone, according to MDA Federal Inc.’s EarthSat Energy Weather in Rockville, Maryland.

“Low pressure may form in the coming days across the Bay of Campeche, but models are bearish on tropical development as of now,” MDA forecasters wrote in a note to clients.

Hot weather in the Northeast and South Central U.S. may boost power-plant demand for natural gas. High temperatures in New York will be above-normal every day next week, according to AccuWeather.com

Wholesale natural gas at the benchmark Henry Hub in Erath, Louisiana, fell 14.02 cents, or 3.5 percent, to $3.8526 per million Btu on the Intercontinental Exchange.

Gas futures volume in electronic trading on the Nymex was 234,389 as of 4:34 p.m., compared with a three-month average of 261,000. Volume was 285,499 yesterday. Open interest was 832,768 contracts, compared with the three-month average of 808,000. The exchange has a one-business-day delay in reporting open interest and full volume data.

To contact the reporters on this story: Christine Buurma in New York at cbuurma1@bloomberg.net; Moming Zhou in New York at Mzhou29@bloomberg.net;

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