Outlook for Expanding Surplus Sends Natural Gas Futures Lower

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Natural gas futures slid on speculation that government data will show a bigger-than-forecast increase in stockpiles, expanding a surplus.

An Energy Information Administration report scheduled for release at 10:30 a.m. in Washington may show that gas stockpiles rose by 63 billion cubic feet in the week ended Aug. 21, based on the median of 16 analyst estimates compiled by Bloomberg. The five-year average gain is 62 billion for the period. Supplies were 2.7 percent above the norm as of Aug. 14.

“If we see a storage number above 65, there’s a good chance we’ll retest recent lows,” said Gene McGillian, a senior analyst and broker at Tradition Energy in Stamford, Connecticut. “The market’s inability to pick its head up is an indication of weak seasonal demand and expectations of production continuing to ramp up.”

Natural gas for September delivery fell 3.2 cents to $2.661 per million British thermal units at 9:34 a.m. on the New York Mercantile Exchange.

September gas expires today. The more actively traded October contract slipped 2.8 cents to $2.675.

By the end of the injection season on Oct. 31, supplies may total 2.867 trillion cubic feet, 1.8 percent above the norm, according to the EIA.

Marketed natural gas production in the U.S. may climb 5.4 percent this year to a record 78.72 billion cubic feet a day, EIA data show.

The EIA this month cut its forecast for the average 2015 price of gas at the benchmark Henry Hub in Erath, Louisiana, to $2.89 per million Btu from $2.97 estimated in July.

Temperatures may be mostly normal in the eastern half of the U.S. through Aug. 31, according to Commodity Weather Group LLC in Bethesda, Maryland. The high in Chicago on Aug. 30 may be 79 degrees Fahrenheit (26 Celsius), 1 less than usual, AccuWeather Inc. data show.

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