Natural Gas Futures Drop Amid Forecasts for Moderating Weather

Natural gas futures in New York declined the most in three weeks on forecasts for moderating weather that would limit demand for the heating fuel after a winter storm passes through the Northeast.

Gas slid 1.7 percent, the biggest drop since Feb. 14, after Andover, Massachusetts-based WSI Corp. predicted mostly average temperatures in the lower-48 states from March 11 through March 15. The low in New York on March 12 may be 36 degrees Fahrenheit (2 Celsius), 2 above normal, according to AccuWeather Inc.

“We’re seeing a change in the forecast and that’s where the pressure is coming from,” said Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York. “We’re generally not seeing temperatures in the 20s here in the 10-day forecast.”

Natural gas for April delivery fell 5.9 cents to $3.47 per million British thermal units on the New York Mercantile Exchange. Trading volume was 22 percent below the 100-day average at 2:48 p.m. Prices settled at $3.529 per million Btu on March 4, the highest close since Jan. 23, and were unchanged yesterday. The futures have gained 3.6 percent this year.

April $3.25 puts were the most active gas options in electronic trading. They were 0.5 cent higher at 2 cents per million Btu on volume of 848 contracts as of 3:53 p.m. Puts accounted for 53 percent of options volume.

May gas traded 4.9 cents above the April contract, compared with 4.6 cents yesterday.

Chicago Weather

About 50 percent of U.S. households use gas for heating, data from the Energy Information Administration show. The agency is part of the Energy Department.

The low in Chicago on March 12 may be 31 degrees Fahrenheit 1 higher than average, according to AccuWeather.

Rain mixed with snow cut accumulations in Washington, according to the National Weather Service. One to two more inches of snow may fall before the storm ends, the agency said. About 0.6 inch fell at College Park, Maryland, north of the capital. The weather service had predicted as much as 8 to 12 inches in Washington and Baltimore.

Farther to the west, about 196,000 utility customers were without power at 3:30 p.m. local time, with power failures concentrated in West Virginia and Virginia, according to data compiled by Bloomberg.

Last year was the warmest in records going back to 1895 for the 48 contiguous U.S. states and the second-worst for weather extremes including drought, hurricanes and wildfires, according to the National Oceanic and Atmospheric Administration.

U.S. Stockpiles

Gas inventories fell by 132 billion cubic feet in the seven days ended March 1, above the five-year average drop of 107 billion for the week, according to the median of 16 analyst estimates compiled by Bloomberg. Last year, supplies slid by 92 billion during that period.

Stockpiles totaled 2.229 trillion cubic feet as of Feb. 22, 16 percent above the five-year average and 12 percent below the year-earlier level.

Marketed gas production will average a record 70.02 billion cubic feet a day this year, up 1.1 percent from 2012, as output from the Marcellus shale formation in the Northeast grows, the EIA said in its monthly Short-Term Energy Outlook, released Feb. 12 in Washington.

Gas prices at the benchmark Henry Hub in Erath, Louisiana, will average $3.53 per million British thermal units in 2013, compared with $2.75 per million Btu last year, the agency said.

Stockpiles of the fuel may total about 2 trillion cubic feet at the end of March, down from 2.477 trillion at the same time last year, according to the report.

Output rose to an all-time high of 28.5 trillion cubic feet in 2011, led by record production from shale deposits, the EIA said in a separate report Jan. 7. Shale accounted for 30 percent of output in 2011, up from 22 percent the previous year.

The boom in oil and natural gas production helped America meet 84 percent of its energy needs in the first 11 months of last year, government data show. If the trend continued through 2012, it will be the highest level of self-sufficiency since 1991.

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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