Natural Gas Futures Fall From Five-Week High on Cooler Weather

Natural gas futures slid from a five-week high in New York as meteorologists predicted moderating temperatures that would reduce power demand.

Gas slipped 1 percent as Commodity Weather Group LLC in Bethesda, Maryland, predicted mostly normal weather in the eastern half of the U.S. from Sept. 4 through Sept. 13 as this week’s heat fades. Government data yesterday showed that gas supplies rose 67 billion cubic feet in the seven days ended Aug. 23, above the five-year average increase of 66 billion.

“As we start to see air-conditioning demand fade, there’s going to be an acceleration in inventory restocking,” said Teri Viswanath, director of commodities strategy at BNP Paribas SA in New York. “There’s a general tendency for prices to soften as we get into September. Prices are marginally lower and we’re seeing light volume today ahead of the holiday weekend.”

Natural gas for October delivery fell 3.7 cents to settle at $3.581 per million British thermal units on the New York Mercantile Exchange. Trading volume was 33 percent below the 100-day average at 2:44 p.m. Prices are up 6.9 percent this year and gained 3.9 percent in August, capping the first monthly increase since April. The futures rose to $3.618 yesterday, the highest settlement price since July 25.

There will be no floor trading on Sept. 2 because of the U.S. Labor Day holiday.

The discount of October to November futures widened 0.1 cent to 10.4 cents. October gas traded 34.5 cents below the January contract, compared with 34 cents yesterday.

Options Trading

October $2.90 puts were the most active options in electronic trading. They were unchanged at 0.2 cent per million Btu on volume of 1,342 at 2:56 p.m. Puts accounted for 66 percent of trading volume. Implied volatility for October at-the-money options was 30.21 percent at 2:45 p.m., compared with 30.66 percent yesterday.

The high in New York on Sept. 8 may be 78 degrees Fahrenheit (26 Celsius), matching the normal temperature, according to AccuWeather Inc. in State College, Pennsylvania. The high in Cleveland may be 76, also the average reading for that day.

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

Natural gas production from the lower-48 states increased 0.1 percent in June to 73.62 billion cubic feet a day from a revised 73.51 billion in May, the EIA said today in a monthly report.

“The growth in June is unlikely to be the end of production growth, as pipeline flow estimates suggest that production established new highs in July,” Biliana Pehlivanova, an analyst at Barclays Plc in New York, said in a note to clients today.

Stockpile Data

Gas inventories totaled 3.13 trillion cubic feet in the week ended Aug. 23, 1.5 percent above the five-year average and 7 percent below last year’s supplies, EIA data show.

The number of rigs drilling for natural gas in the U.S. fell by seven this week to 380, according to a report today from Baker Hughes Inc. in Houston. The total has declined 12 percent this year.

The U.S. met 87 percent of its own energy needs in the first five months of 2013, on pace to be the highest annual rate since 1986, EIA data show.

An area of low pressure over western Africa has a 60 percent chance of becoming a tropical cyclone over the next five days, the National Hurricane Center said in a 2 p.m. outlook.

The Gulf will account for 5.7 percent of U.S. gas production this year, EIA data show. Sept. 10 is the statistical peak of the Atlantic hurricane season, according to the hurricane center.

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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