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Natural Gas Futures Decline on Outlook for Mild U.S. Weather

April 18 (Bloomberg) -- Natural gas futures dropped in New York for the first time in three days as meteorologists predicted milder weather that would reduce demand for the heating and power-plant fuel.

Gas declined as much as 0.9 percent after WSI Corp. in Andover, Massachusetts, said temperatures may be mostly normal in the eastern half of the U.S. from April 28 through May 2. Government data scheduled for release today may show a near-average increase in stockpiles of the fuel for last week, analyst estimates showed.

“Looking at the weather report, there’s nothing crazy in terms of cold temperatures ahead,” said Victor Zevallos, an energy trader at FCStone Latin America LLC in Miami. “Traders know there’s going to be an injection into storage, so that’s already been factored into prices.”

Natural gas for May delivery fell 2.3 cents, or 0.6 percent, to $4.191 per million British thermal units at 9:43 a.m. on the New York Mercantile Exchange. The futures have gained 25 percent this year. Trading volume was 12 percent below the average for the time of day. Prices climbed to $4.29 per million Btu on April 15, the most since July 28, 2011.

The discount of May contracts to October widened 0.1 cent to 10.4 cents. The discount of October to January narrowed 0.2 cent to 29.8 cents.

Options Trading

June $3.75 puts were the most active gas options in electronic trading. They gained 0.1 cent to 2.7 cents per million Btu on volume of 752 contracts as of 9:43 a.m. Puts accounted for 80 percent of options volume.

Implied volatility for at-the-money gas options expiring in June was 31.9 percent at 9:45 a.m., down from 32.25 percent yesterday.

Data scheduled for release at 10:30 a.m. in Washington from the Energy Information Administration may show stockpiles rose 38 billion cubic feet last week, according to the median of 26 analyst estimates compiled by Bloomberg. The five-year average injection is 39 billion. Supplies gained 21 billion in the same week last year.

The low in New York on April 29 may be 50 degrees Fahrenheit (10 Celsius), 1 above average, according to AccuWeather Inc. in State College, Pennsylvania. The low in Cleveland on April 29 may be 51, 3 more than usual.

About 50 percent of U.S. households use gas for heating, said the EIA, the statistical arm of the Energy Department.

Gas output 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.

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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