Natural Gas Drops as Mild Start to November May Cut Fuel Use
Natural gas futures fell in New York, heading for a third weekly loss, as the outlook for a mild start to November signaled reduced heating-fuel demand.
Gas slid as much as 2 percent as forecasters including MDA Weather Services in Gaithersburg, Maryland, predicted seasonal or above-normal temperatures in the eastern U.S. through Nov. 15. Gas inventory gains have topped five-year averages in five of the past six weekly government reports as mild weather limited demand.
“The next six to 10 days look a little above normal in the gas-consuming region,” said Tom Saal, senior vice president of energy trading at FCStone Latin America LLC in Miami. “As the weather stays moderate, we will probably grind down.”
Natural gas for December delivery fell 6 cents, or 1.7 percent, to $3.521 per million British thermal units at 10:43 a.m. on the New York Mercantile Exchange. Trading volume was 27 percent above the 100-day average. Gas has declined 5 percent this week and advanced 5.1 percent this year.
The discount of December to January futures, the most actively traded gas spread, narrowed 0.2 cent to 8 cents from 9.1 cents yesterday. March gas traded 1.8 cents above the April contract, compared with 2.3 cents yesterday.
December $3.50 puts were the most active options in electronic trading. They were up 2.8 cents at 10.4 cents per million Btu on volume of 1,170 at 10:48 a.m. Putts accounted for 65 percent of trading volume. Implied volatility for December at-the-money options was 31.95 percent at 10:45 a.m., compared with 30.35 percent yesterday.
The low in Washington on Nov. 6 may be 59 degrees Fahrenheit (15 Celsius), 15 above average, according to AccuWeather Inc. in State College Pennsylvania. Louisville, Kentucky, may be 1 higher than the usual reading at 44 degrees.
About 49 percent of U.S. households use gas for heating, according to the Energy Information Administration, the Energy Department’s statistical arm.
Gas demand during the first half of this month “will likely be below normal and thus the weekly inventory injections over the same time frame will likely outperform the historical data,” Dominick Chirichella, senior partner at the Energy Management Institute in New York, said in a note to clients today.
“There will be an ample amount of nat gas available this winter, thus reducing the likelihood of any major price spikes during the heating season,” he said.
Spectra Energy Corp. began service with a new gas pipeline today, adding 800 million cubic feet of daily capacity to New Jersey and New York City, according to an e-mailed statement. The $1.2 billion project added 16 miles of pipeline connecting to the Leidy hub, a delivery point for the Marcellus shale in Pennsylvania, and expands Spectra’s Texas Eastern Transmission and Algonquin Gas Transmission Systems.
Gas inventories in the consuming East region rose by 17 billion cubic feet last week to 1.965 trillion, 5.8 percent below year-earlier levels, the EIA said in a report yesterday.
Total stockpiles across the lower 48 states expanded 38 billion to 3.779 trillion, EIA data show. The normal gain for the week ended Oct. 25 was 57 billion.
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