U.S. Natural Gas Falls 4th Day on Milder Weather Forecast

Natural gas futures declined the most in four weeks in New York after U.S. stockpiles increased more than forecast.

Gas slid 3.9 percent, the biggest drop since May 2, after the Energy Information Administration said inventories rose 88 billion cubic feet in the week ended May 24 to 2.141 trillion cubic feet. Analyst estimates compiled by Bloomberg showed a gain of 86 billion. A survey of Bloomberg users also predicted an increase of 86 billion. The five-year average gain for the week is 92 billion cubic feet, EIA data show.

“We’re having a much stronger storage injection season than we saw last year,” said Kent Bayazitoglu, an analyst at Gelber & Associates in Houston. “The inventory numbers have been rebounding over the last couple of weeks and that’s adding some weakness to the market.”

Natural gas for July delivery fell 16.1 cents to settle at $4.023 per million British thermal units on the New York Mercantile Exchange. Trading volume was 13 percent below the 100-day average at 2:41 p.m. The futures have advanced 20 percent this year.

The discount of July to October futures widened 0.6 cent to 2.9 cents.

July $3.70 puts were the most active options in electronic trading. They were 1.2 cents higher at 2.3 cents per million Btu on volume of 2,404 at 3:40 p.m. Puts accounted for 57 percent of trading volume. Implied volatility for at-the-money options expiring in July was 29.90 percent at 3:30 p.m., down from 30.98 percent yesterday.

Supply Deficit

A stockpile deficit to the five-year average was unchanged at 3.9 percent. Supplies were 23.7 percent below year-earlier inventories, compared with 24.9 percent in last week’s report.

MDA Weather Services in Gaithersburg, Maryland, said temperatures would be lower than average in the eastern half of the U.S. from June 4 through June 8 after hot weather this week. The high in New York on June 7 may be 67 degrees Fahrenheit (19 Celsius), 10 less than usual, according to AccuWeather Inc.

The high in Cleveland on June 7 may be 75 degrees Fahrenheit, 1 less than average, according to AccuWeather. Power generation accounts for 33 percent of U.S. gas demand, according to the EIA, the Energy Department’s statistical arm.

“Without a doubt, the persistence of below-normal temperatures in the eastern half of the US will limit electric power demand,” said Teri Viswanath, director of commodities strategy at BNP Paribas SA in New York, in a note to clients today.

U.S. gas output will rise to an all-time high for the sixth straight year as new wells come online at shale formations, such as the Marcellus in the Northeast, the EIA said May 7 in its monthly Short-Term Energy Outlook. Marketed gas production will average a record 69.9 billion cubic feet a day this year, up from 69.18 billion a day in 2012, the agency said.

Before it's here, it's on the Bloomberg Terminal.
LEARN MORE