Natural Gas Futures Slide on Forecasts for Moderating Weather

Natural gas futures declined in New York for the first time in three days on forecasts for lower temperatures that would reduce demand for the power-plant fuel.

Gas dropped as much as 1.8 percent as the weather may turn cooler after a heat wave in the Northeast this week, according to Commodity Weather Group LLC in Bethesda, Maryland. The high in New York on July 24 may be 79 degrees Fahrenheit (26 Celsius), 5 below normal, AccuWeather Inc. said on its website. Readings may reach 95 degrees in New York today.

“Once we slip from these extreme temperatures, the story doesn’t look good for natural gas,” said Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York. “We’re going to see the weather start to cool off over the weekend.”

Natural gas for August delivery fell 3.9 cents, or 1.1 percent, to $3.635 per million British thermal units at 9:31 a.m. on the New York Mercantile Exchange. Trading volume was 1.9 percent above the 100-day average. Prices have climbed 8.5 percent this year.

The discount of August to October futures widened 0.2 cent to 1.2 cents.

August $3.60 puts were the most active options in electronic trading. They were 1.3 cents higher at 5.9 cents per million Btu on volume of 124 at 9:38 a.m. Puts accounted for 63 percent of trading volume. Implied volatility for at-the-money options expiring in August was 31.52 percent at 9:30 a.m., compared with 30.57 percent yesterday.

The high in Washington on July 24 may be 83 degrees Fahrenheit, 5 below normal, AccuWeather data show.

Stockpile Report

Power generation accounts for 32 percent of U.S. gas demand, according to the Energy Information Administration, the Energy Department’s statistical arm.

An EIA report July 18 may show supplies rose 63 billion cubic feet last week, according to the median of three analyst estimates compiled by Bloomberg. The five-year average gain for the week is 70 billion. Stockpiles climbed by 29 billion in the same week last year.

Gas inventories totaled 2.687 trillion cubic feet in the seven days ended July 5, the EIA said July 11. Supplies were 0.8 percent below the five-year average and 14.2 percent below year-earlier stockpiles.

Lower-48 state natural gas output climbed to a five-month high in April as wells were brought online in the Northeast, Texas and New Mexico, government data showed last month.

Gross gas production in the contiguous states rose 0.8 percent to 73.24 billion cubic feet a day, the most since November, from a revised 72.67 billion in March, the EIA’s monthly EIA-914 report showed June 28.

The number of rigs drilling for gas in the U.S. rose by seven to 362 this week, according to data released by Baker Hughes Inc. in Houston. The total is down 16 percent this year.

The U.S. met 89 percent of its own energy needs in March, the highest monthly rate since April 1986, EIA data show.

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

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.