Natural gas futures in New York dropped the most in seven weeks on forecasts of moderating temperatures that may limit demand from power plants.
Gas slid 3.9 percent. The weather may be mostly normal in the eastern half of the U.S. from Oct. 13 to Oct. 17, compared with earlier forecasts for below-normal temperatures, according to Commodity Weather Group LLC. Gas had jumped 17 percent since Sept. 26 on speculation that the cold would boost demand. A supply surplus has dropped to 8.6 percent from 61 percent in March while shale-gas output sends production toward a record.
“Traders are looking at the forecasts,” said Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York. “We’ve run out of momentum after trying to stay above $3.50. A pullback is justified here.”
Natural gas for November delivery fell 13.6 cents to settle at $3.395 per million British thermal units on the New York Mercantile Exchange. The futures have declined 6.1 percent from a year ago. Today’s slide was the biggest percentage drop since Aug. 10. Gas rose to $3.531 per million British thermal units yesterday, the highest settlement price since Dec. 2.
The commodity’s 14-day relative strength index climbed to 74.5 yesterday, the highest since March 2008, as prices jumped. Some traders see a reading of 70 or above as an indication that gains aren’t sustainable.
November $3 puts, bets that prices will fall, were the most active gas options in electronic trading. They rose 0.9 cent to 2.5 cents on volume of 1,261 contracts as of 3:07 p.m. Puts accounted for 52 percent of options volume.
The high in Washington on Oct. 16 may be 69 degrees Fahrenheit (21 Celsius), 1 above normal, according to AccuWeather Inc. in State College, Pennsylvania. The high in Boston may be 59 degrees, 2 less than the usual reading.
Electricity producers account for about 36 percent of U.S. gas consumption, according to the Energy Department.
The U.S. winter may be the second in a row to produce low energy demand for heating even while falling short of the record high temperatures of the 2011-2012 season, MDA EarthSat Weather predicted in an outlook yesterday.
The winter, measured by meteorologists as running from December through February, will probably have temperatures above the 10- and 30-year normal ranges, according to MDA in Gaithersburg, Maryland. The result may be less natural gas, heating oil and electricity needed to warm homes and businesses, MDA said.
“Futures are coming under some selling pressure, with traders taking profits off the recent rally after weather forecasts turned warmer again, undercutting early heating season demand,” said Tim Evans, an energy analyst at Citi Futures Perspective in New York, in a note to clients today.
Government data scheduled for release at 10:30 a.m. tomorrow in Washington may show inventories climbed by 73 billion cubic feet last week to 3.649 trillion, according to the median of 18 analyst estimates compiled by Bloomberg. The five-year average change is an increase of 78 billion.
Gas stockpiles may reach an all-time high of 3.95 trillion cubic feet by the end of October, the Energy Department said Sept. 11 in its Short-Term Energy Outlook.
The U.S. increased its estimate for natural gas production in 2012 by 0.2 percent and lowered its outlook for prices, the outlook showed. Marketed gas output will average 68.86 billion cubic feet a day this year, up from 68.72 billion estimated in August, the report said. Output may rise 4 percent from last year’s record 66.22 billion.
Gas prices at the benchmark Henry Hub in Erath, Louisiana, will average $2.65 per million British thermal units, below the previous forecast of $2.67, the data showed.
The boom in oil and natural gas production helped the U.S. cut its reliance on imported fuel. America met 83 percent of its energy needs in the first six months of the year, department data show. If the trend goes on through 2012, it will be the highest level of self-sufficiency since 1991.
Gas futures volume in electronic trading on the Nymex was 345,927 as of 2:41 p.m., compared with the three-month average of 378,000. Volume was 486,335 yesterday. Open interest was 1.15 million contracts. The three-month average is 1.11 million.
The exchange has a one-business-day delay in reporting full volume and open interest data.