Natural Gas Retreats From 4-Year High on Mild Weather Forecasts

Natural gas futures retreated from a four-year high in New York as meteorologists predicted moderating weather that would reduce heating-fuel demand.

Gas slid 6.4 percent after climbing to $5.737 per million British thermal units, the highest intraday price since Jan. 25, 2010. MDA Weather Services said temperatures would be normal or higher than average in most of the lower-48 states from Feb. 15 through Feb. 19 following bitter cold this week. Gas production may gain 2.1 percent this year, according to the Energy Information Administration.

“The temperatures we’re seeing don’t come close to the polar vortex situation we had in January,” said Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York. “We have healthy production and the industry is going to start replenishing supplies.”

Natural gas for March delivery fell 34.5 cents to settle at $5.03 per million Btu on the New York Mercantile Exchange. Trading volume was 50 percent above the 100-day average at 3:10 p.m. The futures are up 19 percent this year.

March gas traded 48.4 cents above the April contract, compared with 71 cents yesterday.

March $7 calls were the most active options in electronic trading. They were 9.9 cents lower at 1 cents per million Btu on volume of 6,070 at 3:30 p.m. Calls accounted for 66 percent of trading volume.

Options Volatility

Implied volatility for March at-the-money options was 82.52 percent at 3:15 p.m., compared with 33.3 percent for the front-month contract a month ago.

The low in New York on Feb. 15 may be 39 degrees Fahrenheit (4 Celsius), 10 above average, AccuWeather Inc. data show. Cleveland temperatures may fall to 26 degrees, matching the usual reading.

About 49 percent of U.S. households use gas for heating, according to the EIA, the Energy Department’s statistical arm.

The second winter storm of the week swept into the U.S. Northeast today, and another system is forecast to pummel the region in about four days.

Four inches (10 centimeters) of snow fell in New York’s Central Park, with a quarter-inch of ice on top of that, according to the National Weather Service. More than 12 inches were reported in New York City’s northern suburbs.

A storm out of the Rockies is expected to reach the East Coast by Feb. 9, and it may be the worst of the week, AccuWeather said. The track of the system is still in doubt.

Stockpile Data

An EIA report tomorrow may show inventories slid by 273 billion cubic feet last week, compared with a five-year average decrease of 151 billion, according to the median of 18 analyst estimates compiled by Bloomberg.

Gas stockpiles totaled 2.193 trillion cubic feet as of Jan. 24, 16.6 percent below the five-year average and down 23 percent from the same week last year.

“Unrelenting gas production growth” may reduce the storage deficit to year-earlier supplies, Bill Herbert, an analyst at Simmons & Co. in Houston, said in a note to clients today. Stockpiles may increase by 2.4 trillion cubic feet during spring and summer, the largest gain since 2003, Herbert said.

Gross gas output in the contiguous U.S. states rose 1.5 percent in November to average 75.95 billion cubic feet a day as operators reported new wells coming online or wells returning to service in the Marcellus shale in the Northeast, the government said in its EIA-914 report on Jan. 31.

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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