Natural Gas Tumbles to One-Month Low on U.S. Stockpile Outlook

Natural gas futures tumbled to a one-month low in New York as meteorologists predicted moderating weather that would boost stockpile gains.

Gas slid 3.1 percent, the biggest drop since June 27, as MDA Weather Services said temperatures may be normal or cooler than usual on the East Coast through Sept. 28, with above-average readings in the central U.S. Gas supplies totaled 3.299 trillion cubic feet in the week ended Sept. 13, 0.5 percent above the five-year average.

“The weather is clearly not supportive of prices,” said Addison Armstrong, director of market research at Tradition Energy in Stamford, Connecticut. “Once we get past this week, we’re looking at an increasing pace of storage injections.”

Natural gas for October delivery fell 11 cents to $3.492 per million British thermal units on the New York Mercantile Exchange, the lowest settlement since Aug. 23. Trading volume was 9.1 percent above the 100-day average at 2:38 p.m. Prices are up 4.2 percent this year and slipped 2.5 percent this month.

The discount of October to November futures narrowed 0.8 cent to 6.7 cents. October gas traded 33.9 cents below the January contract, unchanged from yesterday.

October $3.50 puts were the most active options in electronic trading. They were 2 cents higher at 2.5 cents per million Btu on volume of 2,696 at 2:50 p.m. Puts accounted for 63 percent of trading volume. Implied volatility for November at-the-money options was 30.1 percent at 2:45 p.m., compared with 30.02 percent yesterday.

Mild Weather

The high in Boston on Sept. 27 may be 67 degrees Fahrenheit (19 Celsius), 1 below the usual reading, according to AccuWeather Inc. in State College, Pennsylvania. The high in Philadelphia may be 75 degrees, 1 more than average.

Power generation accounts for 32 percent of U.S. gas demand, according to the Energy Information Administration, the Energy Department’s statistical arm. About 50 percent of U.S. households use gas for heating.

“The weather is clearly changing and more and more looking like we will be entering a period with minimal cooling demand and no sign of any early heating demand,” Dominick Chirichella, senior partner at the Energy Management Institute in New York, said in a note to clients today.

Citigroup Inc. cut its 2013 average natural gas price forecast to $3.70 per million Btu from $3.90 and reduced its 2014 outlook to $3.75 from $4.45, Robert Morris, an analyst at the bank in New York, said in a note to clients today.

“This revised outlook is primarily the result of stronger-than-originally forecast U.S. natural gas production and markedly lower coal prices than at the start of the year,” Morris said.

Production Estimate

Onshore U.S. gas output may rise 0.8 billion cubic feet a day in 2014 after climbing 1.3 billion a day this year, driven by increases in production from the Marcellus shale formation, Citigroup said in the report.

An EIA report due on Sept. 26 may show inventories rose by 73 billion cubic feet in the week ended Sept. 20, according to the median of six analyst estimates compiled by Bloomberg. The five-year average gain for the period is 75 billion. Supplies increased by 79 billion in the same week last year.

Natural gas production may rise 1.1 percent this year to a record 69.91 billion cubic feet a day, the EIA said Sept. 10 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.

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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