Natural Gas Climbs as Inventory Increase Was Near Forecasts

Natural gas futures gained in New York for the first time in six days, rebounding from a 25-week low, after a government report showed a stockpile increase that was near analyst forecasts.

Gas climbed 1.5 percent after the Energy Information Administration said a U.S. supply increase of 96 billion cubic feet included about 14 billion that was reclassified from base gas to working gas. Analysts expected a gain of 79 billion.

“The reclassification means that supplies really rose by 82 billion cubic feet, which is not the monster injection that people initially thought it was,” said Aaron Calder, an analyst at Gelber & Associates in Houston. “The trade has been really overcrowded on the short side and we’ve been in oversold territory.”

Natural gas for September delivery rose 5 cents to settle at $3.297 per million British thermal units on the New York Mercantile Exchange. Trading volume was 76 percent above the average at 2:44 p.m. Prices have declined 1.6 percent this year. Prices fell to $3.129 per million British thermal units, the lowest intraday price since Feb. 15, immediately following the report before rebounding.

The discount of September to October futures narrowed 0.1 cent to 2.4 cents.

October $3 puts were the most active options in electronic trading. They were 1.6 cents lower at 4 cents per million Btu on volume of 1,276 at 3:27 p.m. Puts accounted for 57 percent of trading volume. Implied volatility for at-the-money options expiring in September was 31.85 percent at 3:15 p.m., compared with 33.11 percent yesterday.

The relative strength index, or RSI, for the front-month contract was 34.8 at 3:18 p.m. after slipping to 28.1 yesterday. A drop below 30 is considered by some traders to be a buy signal, while a number above 70 can be a signal to sell.

EIA Report

Gas dropped as much as 3.6 percent after the EIA said stockpiles climbed in the week ended Aug. 2 to 2.941 trillion cubic feet. Supplies were 0.7 percent above the five-year average, rising to a surplus for the first time since March.

MDA Weather Services in Gaithersburg, Maryland, said the weather may be hotter than average in Texas through Aug. 22.

The high in Dallas on Aug. 21 may be 101 degrees Fahrenheit (38 Celsius), 5 more than usual, according to AccuWeather Inc. in State College, Pennsylvania. Power generation accounts for 32 percent of U.S. gas demand, according to the EIA, the Energy Department’s statistical arm.

“We could certainly have an extended period of hotter weather that would support prices,” said Gordy Elliott, a risk-management specialist at Intl FCStone Inc. in St. Lois Park, Minnesota.

Goldman Outlook

Goldman Sachs Group Inc. is maintaining its view that the U.S. will increase liquefied natural gas exports to 6 billion cubic feet a day by 2021, Jeffrey Currie, an analyst at the bank in New York, said in an e-mailed note to clients dated yesterday.

The Energy Department approved Lake Charles Exports LLC’s application yesterday to ship natural gas from its terminal in Louisiana to countries that lack free-trade agreements with the U.S. The U.S. previously approved such exports from the Sabine Pass LNG terminal in Louisiana and the Freeport LNG terminal in Texas. About 19 applications are pending at the department.

The U.S. cut its 2013 production estimate for marketed natural gas to 69.89 billion cubic feet a day from last month’s forecast of 69.96 billion, the EIA said Aug. 6 in in its Short-Term Energy Outlook. Output may rise 1 percent from a year ago to a record as onshore supplies climb.

Stockpiles may total 3.8 trillion cubic feet at the end of October, about 130 billion below last year’s peak for the time of year, the agency said.

The U.S. met 87 percent of its own energy needs in the first four months of 2013, on pace to be the highest annual rate since 1985, according to EIA 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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