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Natural Gas Futures Decline as Temperature Outlook Moderates

Aug. 28 (Bloomberg) -- Natural gas futures slipped in New York for the first time in three days as forecasts showed a heat wave in the eastern U.S. giving way to cooler September weather.

Gas slid as much as 1.6 percent as WSI Corp. in Andover, Massachusetts, predicted mostly normal temperatures in the eastern half of the U.S. from Sept. 2 through Sept. 11 after higher-than-usual readings this week. The high in New York on Sept. 4 may be 78 degrees Fahrenheit (26 Celsius), 1 lower than average, according to AccuWeather Inc.

“The moderating weather is pushing prices down today,” said Tom Saal, senior vice president of energy trading at FCStone Latin America LLC in Miami. “This is definitely a weather-driven market and we’re just not seeing anything substantial in the forecasts.”

Natural gas for September delivery fell 2.6 cents, or 0.7 percent, to $3.508 per million British thermal units at 12:45 p.m. on the New York Mercantile Exchange. Trading volume was 44 percent below the average for the time of day. Prices are up 4.7 percent this year.

September futures expire today. The more actively traded October contract dropped 3.9 cents, or 1.1 percent, to $3.534 per million Btu.

The discount of September to October futures narrowed 1.1 cents to 2.8 cents. October gas traded 36.4 cents below the January contract, compared with 36.3 cents yesterday.

Gas Options

October $3.70 calls were the most active options in electronic trading. They were 1.8 cents lower at 5.8 cents per million Btu on volume of 788 at 12:46 p.m. Calls accounted for 63 percent of trading volume. Implied volatility for October at-the-money options was 31.01 percent at 12:45 p.m., compared with 31.71 percent yesterday.

The high in Chicago on Sept. 4 may be 76 degrees Fahrenheit, 3 below normal, AccuWeather data show. Power generation accounts for 32 percent of U.S. gas demand, according to the Energy Information Administration, the Energy Department’s statistical arm.

EIA data scheduled for release tomorrow may show gas inventories rose by 62 billion cubic feet in the week ended Aug. 23, according to the median of 16 analyst estimates compiled by Bloomberg. The five-year average increase for the period is 66 billion. Supplies climbed by 64 billion in the same seven days last year.

Stockpiles totaled 3.063 trillion cubic feet in the week ended Aug. 16, or 1.5 percent above the five-year average, according to the EIA. Inventories were 7.2 percent below year-earlier supplies.

September Weather

“Normal temperatures in September are not nearly hot enough to result in a significant impact on the call on natural gas for cooling demand nor on the weekly injection reports,” said Dominick Chirichella, senior partner at the Energy Management Institute in New York, in a note to clients today.

The U.S. met 87 percent of its own energy needs in the first five months of 2013, on pace to be the highest annual rate since 1986, EIA data show.

Showers and thunderstorms between the Cape Verde Islands and the Windward Islands have a 20 percent chance of becoming a tropical cyclone during the next five days, the National Hurricane Center said in an 8 a.m. outlook. Another system over West Africa has a 30 percent chance of strengthening to a tropical cyclone during the same period.

The Gulf will account for 5.7 percent of U.S. gas production this year, EIA data show. Sept. 10 is the statistical peak of the Atlantic hurricane season, according to the National Hurricane Center.

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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