Natural gas futures dropped from the highest price since January on speculation that above-normal stockpile gains will eliminate a deficit to the five-year average.
An Energy Information Administration report scheduled for release Thursday may show that U.S. gas inventories rose by 99 billion cubic feet last week, compared with the five-year average gain of 89 billion for the period, based on the median of three analyst estimates compiled by Bloomberg.
Stockpile increases have exceeded average gains this spring as mild weather reduced fuel demand and production from shale deposits reached records. Gas inventory levels were 2 percent below the five-year average as of May 8, narrowing from a 13 percent deficit in March.
“It will be interesting to see if the $3 level can survive the inventory number,” said Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York. “The market is looking for something close to triple digits, which would be a pretty big number for the week.”
Natural gas for June delivery fell 6.2 cents, or 2.1 percent, to settle at $2.948 per million British thermal units on the New York Mercantile Exchange. Volume for all futures traded was 65 percent above the 100-day average at 2:37 p.m. Prices reached $3.105 per million Btu in earlier trading, the highest since Jan. 16.
“We continue to view the advance of the past three weeks as largely technical,” Tim Evans, an energy analyst at Citi Futures Perspective in New York, said in a note to clients Tuesday.
Gas stockpiles were 66 percent above the year-earlier total as of May 8. Inventories have been at a surplus to the average since December.
Gas production may climb 6 percent to average a record 79.22 billion cubic feet a day this year as a backlog of drilled wells are completed in the Marcellus shale formation, the Energy Information Administration said May 12 in its monthly Short-Term Energy Outlook.
Output from the Marcellus, the biggest reservoir by volume, may climb to 16.737 billion cubic feet a day in June, up 14 percent from a year earlier and the highest in EIA data going back to 2007.
The weather may be cooler than normal in most of the lower 48 states through May 23, according to Commodity Weather Group LLC in Bethesda, Maryland.
The high in Cincinnati on May 21 may be 68 degrees Fahrenheit (20 Celsius), 8 lower than average, AccuWeather Inc. said on its website. Washington’s temperature may also climb to 68 degrees, 9 less than usual.
Power plants account for 33 percent of gas demand in the U.S., EIA data show.