Natural gas futures slipped for a second day in New York on forecasts of moderate weather in the eastern third of the U.S. that would reduce fuel demand.
Gas dropped 1.6 percent as MDA Weather Services predicted above-normal temperatures on the East Coast through April 18. The low in New York on April 11 may be 50 degrees Fahrenheit (10 Celsius), 7 above average, and the high may be 63, according to AccuWeather Inc. Gas yesterday reached $4.18 per million Btu, the highest intraday price since Aug. 3, 2011.
“The warm weather is kicking in and that’s bearish for heating demand,” said Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York. “We’re seeing a little bit of a pullback here from the 18-month high.”
Natural gas for May delivery fell 6.5 cents to settle at $4.017 per million British thermal units on the New York Mercantile Exchange. The futures have climbed 20 percent this year. Trading volume was 9.6 percent above the 100-day average at 3:16 p.m.
The discount of May contracts to October widened 0.9 cent to 10 cents. The discount of October to January widened 0.3 cent to 28.3 cents.
May $3.50 puts were the most active gas options in electronic trading. They rose 0.1 cent to 0.3 cent per million Btu on volume of 520 contracts as of 3:04 p.m. Puts accounted for 48 percent of options volume.
Implied volatility for at-the-money gas options expiring in May was 29.14 percent at 3:15 p.m., down from 29.88 percent on April 5. June options volatility was 28.14 percent, down from 28.73 percent.
The low in Boston on April 11 may be 40 degrees Fahrenheit (4 Celsius), 1 higher than usual, according to AccuWeather in State College, Pennsylvania.
About 50 percent of U.S. households use gas for heating, according to the Energy Information Administration, the statistical arm of the Energy Department.
Natural gas will probably drop 10 percent before July and will stay in a price range of $3.50 to $4.50 per million Btu this year as supplies remain “robust”, James Sullivan, an analyst at Alembic Global Advisors in New York, said in a note to clients today.
The U.S. has 2,384 trillion cubic feet of recoverable natural gas reserves, the industry-sponsored Potential Gas Committee said today.
The estimate is the highest in the 48 years the group has been assessing natural-gas resources and up from the last estimate in 2010 by 486 trillion cubic feet, the committee said on a conference call.
The U.S. lowered its forecast for natural gas output in 2013 by 0.4 percent and raised its outlook for prices.
Marketed gas production will average a record 69.33 billion cubic feet a day this year, down from 69.6 billion estimated in March, the Energy Information Administration said in its monthly Short-Term Energy Outlook, released today in Washington.
Gas prices at the benchmark Henry Hub in Erath, Louisiana, will average $3.52 per million British thermal units, higher than the previous estimate of $3.41, according to the report from the EIA, the Energy Department’s statistical arm.
Deutsche Bank is maintaining its 2013 natural gas price forecast of $3.75 per million Btu, Soozhana Choi, an analyst at the bank in Washington, said in a note to clients today.
“Our forecast reflects expectations that supply restraints will materialize this year,” Choi said. “We note that supply curbs may be greater than expected, which would imply a tighter balance and upside price risk. That, combined with a hot summer, could tighten up the balance more than expected.”
Gas production rose to an all-time high of 28.5 trillion cubic feet in 2011, led by record output from shale deposits, the EIA said in a report Jan. 7. Shale accounted for 30 percent of total production in 2011, up from 22 percent the previous year.
The boom in oil and natural gas production helped the U.S. cut its reliance on imported fuel. The U.S. produced 84 percent of its own energy in 2012, the most since 1991, EIA data show. The measure of self-sufficiency rose to 88 percent in December, the highest since February 1987.
---With assistance from Mark Drajem in Washington and Asjylyn Loder in New York. Editors: Bill Banker, Charlotte Porter