Natural gas futures fell the most in almost three weeks on speculation that mild weather will limit demand and spur fuel stockpiling.
Gas dropped 2.5 percent, the largest one-day decline since May 22, as MDA Weather Services in Gaithersburg, Maryland, forecast below-normal temperatures for the central U.S. over the next five days. The high in Chicago on June 13 will be 72 degrees Fahrenheit (22 Celsius), 7 degrees below normal, according to AccuWeather Inc.
“There’s not a lot of extreme weather,” said Tom Saal, senior vice president of energy trading at FCStone Latin America LLC in Miami. “That’s maybe causing the market to dip down.”
Natural gas for July delivery fell 11.5 cents to close at $4.53 per million British thermal units on the New York Mercantile Exchange, the lowest settlement price since May 27. Volume for all futures traded was 22 percent above the 100-day average at 3:30 p.m. Gas is up 7.1 percent this year.
Gas inventories probably rose 109 billion cubic feet in the week ended June 6, according to the median of six analyst estimates compiled by Bloomberg. The five-year average gain for the period was 88 billion, government data show. Supplies rose 97 billion the same week last year.
U.S. stockpiles totaled 1.499 trillion cubic feet in the week ended May 30, the lowest level for the time of year since 2003, according data from to the U.S. Energy Information Administration, the statistical arm of the Energy Department. Inventory levels were 37 percent below the five-year average for the period.
“We have a lot of space to fill up,” Saal said. “We probably need triple digits from now until November. And if you look back in history we’ve never done that.”
The EIA raised its estimates on storage levels by the end of October to 3.424 trillion cubic feet, up from its previous projection of 3.405 trillion, according to the agency’s Short-Term Energy Outlook, released today.
Marketed gas production will average an all-time high of 73 billion cubic feet a day this year, up 4 percent from 2013, the EIA said in the outlook.
The government agency left its forecast for average gas prices this year unchanged at $4.74 per million Btu.