Natural gas futures slid to a two-week low in New York amid speculation that government reports this week will show above-average U.S. inventory gains.
Gas fell 2.6 percent before an Energy Information Administration report tomorrow that may show supplies rose 79 billion cubic feet in the week ended Oct. 11, based on the median of 20 analyst estimates compiled by Bloomberg. The five-year average increase is 75 billion. Data for last week will be released Oct. 24.
“This week we are going to get two storage reports, which ought to create some volatility,” said Tom Saal, senior vice president of energy trading at FCStone Latin America LLC in Miami. “The injections will be what they have been recently, probably a little bit on the healthy side.”
Natural gas for November delivery fell 9.6 cents to $3.668 per million British thermal units on the New York Mercantile Exchange, the lowest settlement price since Oct. 7. Trading volume was 7.2 percent below the 100-day average as of 2:36 p.m. Gas futures have risen 9.5 percent this year.
The discount of November to December futures narrowed 0.8 cent to 12.5 cents, the narrowest spread between the months for this time of the year since 2000. November gas traded 21.6 cents below the January contract, compared with 22.1 cents on Oct. 18.
January $2.95 puts were among the most active options in electronic trading. They were 0.1 cent higher at 0.6 cent per million Btu on volume of 1,385 at 2:39 p.m. January $5.60 calls for the same month fell 0.1 cent to 0.5 cent also on volume of 1,385. Puts accounted for 56 percent of trading volume. Implied volatility for December at-the-money options was 33.08 percent at 2:45 p.m., compared with 32.81 percent on Oct. 18.
The EIA’s release of two inventory reports this week will make up for information that wasn’t published because of the government shutdown. Data for the week ended Oct. 11 will be issued tomorrow at 10:30 a.m. The supply report for last week will be released on Oct. 24 as the normal schedule resumes.
The second report will probably show an above-average gain because of mild weather in the first half of the month, Saal said. “The market has the ability to absorb them, not disintegrate.”
U.S. stockpiles totaled 3.577 trillion cubic feet in the week ended Oct. 4, 1.6 percent above the five-year average for the seven days, EIA data show.
“We expect natural gas to be well supported in coming weeks as colder-than-normal weather suppresses injections this week and into early November,” Michael Lewis, an analyst with Deutsche Bank AG in London, said in a note to clients today.
The forecast for the Midwest and East turned colder, with temperatures staying below normal in eastern states through Nov. 4, according to Commodity Weather Group LLC in Bethesda, Maryland.
The low temperature in Chicago on Oct. 28 may be 31 degrees Fahrenheit (minus 1 Celsius), 11 below average, and New York City may be 10 below normal at 36 degrees, according to AccuWeather Inc. in State College, Pennsylvania.
About 49 percent of U.S. households use gas for heating while 39 percent use electricity, according to the Energy Information Administration, the statistical arm of the Energy Department.
“From a technical perspective, the market is at a crossroads and currently in need of fundamental support to push prices higher from current levels,” Dominick Chirichella, senior partner at the Energy Management Institute in New York, said in a note to clients today. It’s proving difficult for gas futures to breach and remain above “the key technical resistance level” of $3.80 per million Btu, he said.