Natural Gas Futures Decline on Outlook for U.S. Stockpiles

Natural gas futures slid for the third time in four days in New York on speculation that government data will show a larger-than-normal increase in stockpiles of the power-plant fuel.

Gas declined 0.6 percent. An Energy Information Administration report scheduled for release Sept. 12 may show inventories grew by 65 billion cubic feet in the week ended Sept. 6, according to the median of six analyst estimates compiled by Bloomberg. The five-year average gain for the week is 62 billion.

“The storage injection possibly coming in above average is putting pressure on the market,” said Phil Flynn, a senior market analyst at Price Futures Group in Chicago. “We had a little bit of a drop in demand last week and inventories are starting to catch up.”

Natural gas for October delivery fell 2.1 cents to settle at $3.584 per million British thermal units on the New York Mercantile Exchange. Trading volume was 24 percent below the 100-day average at 2:50 p.m. Prices are up 7 percent this year.

The discount of October to November futures was unchanged at 7.6 cents. October gas traded 32.2 cents below the January contract, compared with 31.6 cents yesterday.

Options Trading

February $4.60 calls were the most active options in electronic trading. They were 0.4 cent lower at 7.5 cents per million Btu on volume of 720 at 2:59 p.m. Calls accounted for 62 percent of trading volume. Implied volatility for October at-the-money options was 29.83 percent at 2:45 p.m., compared with 29.28 percent yesterday.

Gas inventories totaled 3.188 trillion cubic feet in the week ended Aug. 30, 1.4 percent above the five-year average and 6.2 percent below last year’s supplies, EIA data show.

Commodity Weather Group LLC in Bethesda, Maryland, predicted temperatures would be mostly normal on the East Coast from Sept. 15 through Sept. 24.

The high in New York on Sept. 22 may be 73 degrees Fahrenheit (23 Celsius), matching the normal reading, said 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.

Natural gas production may rise 1.1 percent this year to 69.91 billion cubic feet a day, the EIA said today in its Short-Term Energy Outlook. The agency increased its forecast from 69.89 billion last month.

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, according to the EIA.

Tropical Systems

Tropical Storm Gabrielle was approaching Bermuda with maximum sustained winds near 50 miles (80 kilometers) per hour, the National Hurricane Center in Miami said in a 1:30 p.m. outlook. An area of showers and thunderstorms in the northwestern Caribbean Sea is moving toward the Bay of Campeche and has a 70 percent chance of becoming a tropical cyclone in the next five days.

The Gulf will account for 5.7 percent of U.S. gas production this year, EIA data show. Today 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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