Natural Gas Drops on Estimates for Above-Normal Inventory Gain

Natural gas futures declined in New York for the fourth time in five days on forecasts for a larger-than-average increase in U.S. supply of the power-plant fuel.

Gas dropped 0.5 percent. Government data tomorrow may show supplies rose by 67 billion cubic feet last week, according to the median of 21 analyst estimates compiled by Bloomberg. The five-year average gain is 62 billion. Commodity Weather Group LLC predicted mostly normal East Coast temperatures next week after a burst of heat subsides.

“The market is looking for a number that’s a little bit higher than usual,” said Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York. “After this surge of hot weather passes, it’s not going to be a good situation for the bulls.”

Natural gas for October delivery fell 1.7 cents to settle at $3.567 per million British thermal units on the New York Mercantile Exchange. Trading volume was 2.6 percent above the 100-day average at 2:45 p.m. Prices are up 6.4 percent this year.

The discount of October to November futures narrowed 0.1 cent to 7.7 cents. October gas traded 31.6 cents below the January contract, compared with 32.3 cents yesterday.

Options Trading

November $4.50 calls were the most active options in electronic trading. They were unchanged at 0.6 cent per million Btu on volume of 3,111 at 3:02 p.m. Calls accounted for 50 percent of trading volume. Implied volatility for October at-the-money options was 29.42 percent at 3 p.m., compared with 30.05 percent yesterday.

Gas inventories totaled 3.188 trillion cubic feet in the week ended Aug. 30, 1.4 percent above the five-year average and 6.2 percent below last year’s supplies, EIA data show.

The high in New York on Sept. 16 may be 75 degrees Fahrenheit (24 Celsius), matching the normal reading, data from AccuWeather Inc. in State College, Pennsylvania, show. The high in Philadelphia may be 77 degrees, 1 lower than usual.

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

“The realities of the cool outlook are keeping prices very much in check,” Mike Fitzpatrick, editor of the Energy OverView newsletter in New York, wrote today. “Prices should continue lower, as the inventory builds will continue to reduce the year-on-year deficit.”

Gas Production

Natural gas production may rise 1.1 percent this year to a record 69.91 billion cubic feet a day, the EIA said yesterday in its Short-Term Energy Outlook. The agency increased its forecast from 69.89 billion last month.

The U.S. met 87 percent of its energy needs in the first five months of 2013, on pace to be the highest annual rate since 1986, according to the EIA.

Hurricane Humberto was in the far eastern Atlantic, heading north with maximum sustained winds near 80 miles (129 kilometers) per hour, the National Hurricane Center in Miami said in an 11 a.m. advisory. The storm is the first Atlantic hurricane of the season.

Tropical Storm Gabrielle was about 65 miles west of Bermuda with maximum sustained winds of 45 miles per hour. A large area of thunderstorms over the northwestern Caribbean Sea and Yucatan Peninsula is moving toward the Bay of Campeche and has a 70 percent chance of becoming a tropical cyclone over the next five days.

The Gulf of Mexico will account for 5.6 percent of U.S. gas production this year, EIA data show. Today is the statistical peak of the Atlantic hurricane season, according to the hurricane center.

Dominion Resources Inc. won U.S. Energy Department approval to export liquefied natural gas from an existing import terminal in Maryland, the fourth such project authorized by the agency amid a natural-gas glut.

The project to modify the terminal, which may cost as much as $3.8 billion, was approved pending environmental reviews, according to a company statement today.

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