Natural Gas Caps Weekly Decline as Supplies Approach Record

Natural gas capped its first weekly drop since September as stockpiles approached a record after a bigger-than-normal storage injection yesterday.

The futures declined 1 percent after Energy Department data showed inventories rose 67 billion cubic feet to 3.843 trillion in the week ended Oct. 19. The five-year average gain for that period is 65 billion. Supplies may climb to an all-time high of 3.903 trillion cubic feet by Oct. 31, department estimates show.

“We’re still oversupplied,” said Dominick Chirichella, senior partner at the Energy Management Institute in New York. “Storage injections are going to pop higher in the next couple of weeks. The bloom is off the rose for this market.”

Natural gas for November delivery fell 3.4 cents to settle at $3.40 per million British thermal units on the New York Mercantile Exchange. The futures were down 6 percent this week, the first weekly drop since the seven days ended Sept. 21. Gas advanced to $3.648 per million Btu on Oct. 22, the highest intraday price since Dec. 2.

February $5.50 calls were the most active gas options in electronic trading. They were down 0.2 cent at 1.2 cents on volume of 2,663 contracts as of 3:18 p.m. Calls accounted for 69 percent of options volume.

Hurricane Sandy, currently off the coast of Florida, is expected to move north and come ashore just south of Delaware Bay on Oct. 30, according to the National Hurricane Center.

The storm will bring heavy rain and high winds, “which could knock out large areas of electricity,” Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut, said in a note to clients today.

Hurricane Sandy

Power producers account for about 36 percent of U.S. gas consumption, according to the Energy Department.

As of 2 p.m. New York time, Sandy’s top winds were 75 miles (121 kilometers) per hour, the Miami-based center said. It was about 430 miles south-southeast of Charleston, South Carolina, and moving north at 7 mph.

WSI Corp. in Andover, Massachusetts, predicted mostly normal weather across the continental U.S. from Nov. 5 through Nov. 9.

The low in New York on Nov. 7 may be 45 degrees Fahrenheit (7 Celsius), 1 above normal, according to AccuWeather Inc. in State College, Pennsylvania. The low in Chicago may be 44 degrees, 6 more than the usual reading.

About 50 percent of U.S. households use gas for heating, according to the Energy Department.

Mild Weather

A lack of Pacific Ocean warming and of blocking patterns in the Atlantic will probably mean warmer-than-normal weather in the eastern U.S. for the next three months, said Todd Crawford, chief meteorologist at Weather Services International.

Temperatures in the East may be about 2 degrees Fahrenheit above normal from November through January, while the Northwest cools, according to a seasonal forecast Oct. 22 from the Andover, Massachusetts-based company.

U.S. natural gas production in 2012 will average an all- time high of 68.85 billion cubic feet a day, up 4 percent from last year, the Energy Department said Oct. 10 in its monthly Short-Term Energy Outlook.

The boom in oil and natural gas production helped the U.S. cut its reliance on imported fuel. America met 83 percent of its energy needs in the first six months of the year, department data show. If the trend goes on through 2012, it will be the highest level of self-sufficiency since 1991.

The number of rigs drilling for natural gas in the U.S. fell by 11 to 416 this week the lowest level since June 1999, according to data released today by Baker Hughes Inc. in Houston. The rig count has dropped 49 percent this year.

Gas futures volume in electronic trading on the Nymex was 230,526 as of 3:22 p.m., compared with the three-month average of 394,000. Volume was 402,921 yesterday. Open interest was 1.2 million contracts. The three-month average is 1.12 million.

The exchange has a one-business-day delay in reporting full volume and open interest data.

To contact the reporter on this story: Christine Buurma in New York at cbuurma1@bloomberg.net;

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net

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