Natural Gas Futures Decline on Forecasts for Moderating Weather

Natural gas futures slid in New York for the first time in four days on forecasts for moderating temperatures that would limit demand for electricity generation.

Gas fell 2 percent as Commodity Weather Group LLC in Bethesda, Maryland, predicted normal weather in most of the eastern half of the U.S. from July 10 through July 19. The high in New York on July 15 may be 84 degrees Fahrenheit (29 Celsius), matching the usual reading, according to AccuWeather Inc. in State College, Pennsylvania.

“The gas market moves are all weather-related right now,” said Victor Zevallos, an energy trader at FCStone Latin America LLC in Miami. “We’re not seeing a clear indication of strong cooling demand and we’re still pretty well supplied.”

Natural gas for August delivery fell 7.3 cents to settle at $3.617 per million British thermal units on the New York Mercantile Exchange. Trading volume was 46 percent below the 100-day average at 2:54 p.m. Prices have climbed 7.9 percent this year and rose 1.5 percent this week.

The discount of August to October futures widened 0.4 cent to 1.7 cents.

September $4.60 calls were the most active options in electronic trading. They were 0.2 cent lower at 0.7 cent per million Btu on volume of 3,397 at 3:03 p.m. Calls accounted for 50 percent of trading volume. Implied volatility for at-the-money options expiring in August was 29.64 percent at 3 p.m., compared with 29.36 percent on July 3.

Midwest Temperature

The high in Cincinnati on July 15 may be 85 degrees Fahrenheit, 3 below normal, AccuWeather data show.

Power generation accounts for 32 percent of U.S. gas demand, according to the Energy Information Administration, the Energy Department’s statistical arm.

Gas inventories rose 72 billion cubic feet in the week ended June 28 to 2.605 trillion cubic feet, the EIA said July 3. A deficit to the five-year average narrowed to 1.1 percent from 1.2 percent the previous week. Supplies were 15.9 percent below year-earlier stockpiles, compared with 17.1 percent a week earlier.

Lower-48 state natural gas output climbed to a five-month high in April as wells were brought online in the Northeast, Texas and New Mexico, government data showed last week.

Gross gas production in the contiguous states rose 0.8 percent to 73.24 billion cubic feet a day, the most since November, from a revised 72.67 billion in March, the EIA’s monthly EIA-914 report showed June 28.

Hottest Months

“The market remains well supplied ahead of the hottest months of the year, with production still on the rise and the year-on-year storage deficit firmly on a downward trajectory,” said Biliana Pehlivanova, an analyst at Barclays Plc in New York, in a note to clients today.

The number of rigs drilling for natural gas in the U.S. rose by two to 355 this week, according to data released July 3 by Baker Hughes Inc. in Houston. The gas rig total is down 18 percent this year.

The U.S. met 89 percent of its own energy needs in March, the highest monthly rate since April 1986, EIA data show.

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