Gas Futures Drop to Three-Year Low as Hurricane Threat Looms

  • Supplies rose 98 billion cubic feet; forecast was 100 billion
  • Hurricane Joaquin `leading to a lot of demand destruction'

Natural gas futures crashed to a three-year low as warm weather cut demand for the heating fuel and Hurricane Joaquin threatened to prolong higher-than-average temperatures.

Natural gas for November delivery fell 9.1 cents, or 3.6 percent, to settle at $2.433 per million British thermal units on the New York Mercantile Exchange. The last time gas closed lower was June 13, 2012, when futures slid to $2.185.

Mild fall weather across much of the U.S. is limiting early winter heating demand, a situation that may be prolonged as Hurricane Joaquin brings warm and wet weather to the Eastern Seaboard. Temperatures may be higher than average across the eastern and central U.S. through Oct. 10, according to MDA Weather Services.

“Fundamentals are still oversupplied,” Aaron Calder, senior market analyst at Gelber & Associates in Houston, said in a telephone interview. “The reason the market is down the last few days is Hurricane Joaquin, which is leading to a lot of demand destruction.”

Fuel Supplies

Gas stockpiles rose 98 billion cubic feet in the week ended Sept. 25 to 3.538 trillion cubic feet, the Energy Information Administration said Thursday. Analyst estimates compiled by Bloomberg showed an injection of 100 billion, while a survey of Bloomberg users predicted an increase of 99 billion.

The stockpile increase was bigger than the five-year average gain for the week of 94 billion cubic feet, according to the EIA. A surplus to the five-year average held steady at 4.5 percent compared to the previous week. Supplies were 15 percent above year-earlier inventories, compared with 16 percent in last week’s report.

Gas traded at $2.493 before the storage number was released at 10:30 a.m. in Washington.

Pennsylvania Output

Readings in Chicago may reach 70 degrees Fahrenheit (21 Celsius) on October 15, 7 degrees above normal, according to AccuWeather Inc. Power plants account for 33 percent of gas demand, EIA data show. Gas consumption by electricity generators was 6.2 percent above the year-ago level as of Wednesday, data from LCI Energy Insight show.

Natural gas prices will probably trade below $3 per million Btu through November, boosting demand from electricity generators, the U.S. Energy Information Administration said Sept. 9 in its monthly Short-Term Energy Outlook. Consumption by power plants may surge 14 percent this year, according to the report.

Gas production from Pennsylvania, the second-largest producing state by volume, rose 3.4 percent in July to 12.727 billion cubic feet a day from the previous month, the EIA said Sept. 30 in its monthly EIA-914 production report. Gross gas output in the U.S. fell 0.3 percent in July to 89.460 billion cubic feet a day, EIA data show.

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