Natural Gas Drops to One-Week Low on Outlook for Stockpile Gain

Natural gas futures slid to a one-week low in New York on speculation that a government report today will show an above-average U.S. stockpile increase.

Gas fell as much as 1.7 percent before the Energy Information Administration may say supplies rose 23 billion cubic feet last week, based on the median of 25 analyst estimates compiled by Bloomberg. Stockpiles expanded by 12 billion cubic feet a year earlier and the five-year average gain for the week is 19 billion.

“It’s going to be a little bit above the five-year average and that may be why they are taking profits,” said Phil Flynn, senior market analyst at Price Futures Group in Chicago. “We had six up days in a row, it was baby steps but we are wiping that out in two days.”

Natural gas for December delivery fell 5 cents, or 1.4 percent, to $3.516 per million British thermal units at 9:47 a.m. on the New York Mercantile Exchange after dropping to $3.505, the lowest intraday price since Nov. 7. Trading volume was 6 percent below the 100-day average. Prices have climbed 4.9 percent this year.

The discount of December to January futures narrowed 0.4 cent to 4.8 cents. March gas traded 0.8 cent above the April contract versus 1.1 cents yesterday.

April $6 calls were the most active options in electronic trading. They were unchanged at 0.3 cent per million Btu on volume of 450 at 9:49 a.m. Calls accounted for 75 percent of trading volume.

Supply Increase

Today’s inventory report “should represent the last injection of the year until the conclusion of the winter season,” Jeff Dietert, managing director with Simmons & Co. in Houston, said in a note to clients today.

The number of heating degree days, a measure of weather related demand for gas based on population, totaled 103 in the week ended Nov. 7, 7 percent below the 30-year norm of 111 for the period and 18 percent lower than last year’s count of 125, Dietert said.

A blast of cold in the eastern U.S. this week will moderate over the next five days before below-normal temperatures again sweep across the East Coast and into Midwest from Nov. 19 through Nov. 28, said MDA Weather Services in Gaithersburg, Maryland.

Cold Weather

The low in Chicago on Nov. 27 may be 17 degrees Fahrenheit (minus 8 Celsius), 12 below normal, and New York City may be 11 lower than average at 27 degrees, according to AccuWeather Inc. in State College, Pennsylvania. Atlanta may be 5 below normal at 34 degrees. About 49 percent of U.S. households use gas for heating, according to the EIA, the Energy Department’s statistical arm.

Gas inventories totaled 3.814 trillion cubic feet in the week ended Nov. 1, 1.5 percent above the five-year average for the period, EIA data show.

“We continue to have record production, that’s why we are above the five-year average,” Flynn said.

The government raised its production forecast for 2013 by 0.4 percent to 70.29 billion cubic feet a day from 70 billion the previous month, the EIA said yesterday in its Short-Term Energy Outlook. Output will increase 1.6 percent from the 2012 record of 69.18 billion, driven higher for the sixth straight year as new wells come online in the Marcellus shale formation in the Northeast, the report showed.

Marcellus production may climb 3.3 percent in December to 12.9 billion cubic feet a day from an estimated 12.5 billion in November, the EIA said yesterday in its monthly Drilling Productivity Report.

To contact the reporter on this story: Chou Hui Hong in Singapore at chong43@bloomberg.net

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net

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