Natural gas futures in New York slumped the most in almost five months as meteorologists predicted milder weather that would limit heating fuel demand.
Gas tumbled 3.7 percent, the biggest drop since June 6. MDA Weather Services said temperatures would be average or above in most of the Northeast and Midwest through Nov. 11. Last week’s forecasts were for colder-than-usual weather in the central U.S. A gas surplus to the five-year average widened to 2.1 percent from 1.6 percent in the seven days ended Oct. 18 from a week earlier, government data showed.
“We have mild weather out on the horizon and heating demand is waning,” said Tom Saal, senior vice president of energy trading at FCStone Latin America LLC in Miami. “The market is putting an ample amount of gas in storage for this time of year.”
Natural gas for November delivery fell 13.8 cents to $3.569 per million British thermal units on the New York Mercantile Exchange, the lowest settlement since Oct. 4. Trading volume was 1.2 percent below the average at 2:47 p.m. Prices have climbed 6.5 percent this year.
The discount of November to December futures narrowed 1.3 cents to 9.2 cents. November gas traded 17 cents below the January contract, compared with 17.9 cents on Oct. 25.
November gas options expire today. November $3.60 calls were the most active options in electronic trading. They were 11.5 cents lower at 0.2 cent per million Btu on volume of 2,000 at 3:02 p.m. Calls accounted for 55 percent of trading volume. Implied volatility for December at-the-money options was 30.59 percent, compared with 31.19 percent on Oct. 25.
The low in Chicago on Nov. 5 may be 40 degrees Fahrenheit (4 Celsius), compared with an average of 39, according to AccuWeather Inc. in State College, Pennsylvania. About 49 percent of U.S. households use gas for heating, data from the Energy Information Administration, the Energy Department’s statistical arm, show.
“The far end of the 14-day forecasts now show a warmer-than-normal start to November, which indicates short-term weakness ahead,” Soozhana Choi, a strategist at Deutsche Bank AG in Washington, said in a note to clients today.
Gas stockpiles totaled 3.741 trillion cubic feet in the week ended Oct. 18, the EIA reported. Supplies were 2.4 percent below year-earlier inventories, compared with 3.1 percent in the prior period.
The Marcellus shale formation is driving gas production growth in the U.S., the EIA said Oct. 22 in the first edition of its Drilling Productivity Report. Output from the region may increase by 408 million cubic feet per day, or 3.3 percent, to 12.6 billion from October to November, according to the report.
Marketed gas production may climb 1.2 percent this year to a record 70 billion cubic feet a day, the EIA said Oct. 8 in its monthly Short-Term Energy Outlook. The U.S. met 87 percent of its own energy needs in the first six months of 2013, on pace to be the highest annual rate since 1986, the EIA said.
The number of rigs drilling for natural gas in the U.S. rose by four to 376, data released Oct. 25 by Baker Hughes Inc. in Houston showed. The total is down 13 percent this year.