Natural Gas Steady Near One-Month Low on Stockpile Outlook

Natural gas futures were little changed in New York on speculation that a supply gain last week may match year-earlier levels, and as traders closed out of October futures positions before expiration tomorrow.

Gas was less than 1 percent higher before a government report tomorrow that may show U.S. inventories rose by 79 billion cubic feet, based on the median of 16 analyst estimates compiled by Bloomberg. Temperatures will be seasonally mild in eastern states from Oct. 5 through Oct. 9, Commodity Weather Group LLC said. October gas options expire today.

“The gas market has to trade through some fairly large expected inventory builds the next three weeks,” said Brison Bickerton, head of strategy at Freepoint Commodities LLC in Stamford, Connecticut. “Cold-weather maps would trump those builds, but unless those maps show up, I could see us consolidating prices here for a while.”

Natural gas for October delivery gained 0.1 cent to settle at $3.493 per million British thermal units on the New York Mercantile Exchange. Trading volume was 14 percent below the 100-day average at 3:35 p.m. Gas yesterday closed at $3.492, the lowest level since Aug. 23. Prices are up 4.2 percent this year and slid 2.5 percent this month.

The more active November contracts fell 1.3 cents, or 0.4 percent, to $3.546. The discount of November to January futures narrowed 0.3 cent to 26.9 cents.

Gas Options

October $3.50 puts were the most active options in electronic trading. They were 2.3 cents lower at 0.7 cent per million Btu on volume of 1,051 at 3:38 p.m. Puts accounted for 47 percent of trading volume. Implied volatility for November at-the-money options was 30.22 percent at 3 p.m., compared with 30.23 percent yesterday.

Gas dropped below the 50-day moving average yesterday.

“It was just getting drilled so hard over the last couple of days, there is some support here from people covering some shorts,” said Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York.

Inventory estimates compiled by Bloomberg ranged from gains of 61 billion to 85 billion cubic feet. The five-year average increase for the week ended Sept. 20 is 75 billion, data show from the Energy Information Administration, the statistical arm of the Energy Department. Gas stockpiles totaled 3.299 trillion cubic feet as of Sept. 13, 0.5 percent above the five-year average.

Weekly Gains

Temperatures from the Midwest to the East Coast may be above normal from Sept. 30 through Oct. 4 before returning to seasonal norms in the following five days, according to Commodity Weather Group.

“This is a bearish demand situation” because of a lack of early-season heating demand, Matt Rogers, president of the Bethesda, Maryland-based forecaster, said in a note to clients today.

The high in Chicago on Oct. 3 may be 66 degrees Fahrenheit (19 Celsius), 2 below normal, said AccuWeather Inc. in State College, Pennsylvania. Atlanta’s high on Oct. 9 may be 65 degrees, 10 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. About 50 percent of U.S. households use gas for heating.

Natural gas production may rise 1.1 percent this year to a record 69.91 billion cubic feet a day, the EIA said Sept. 10 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 own energy needs in the first six months of 2013, on pace to be the highest annual rate since 1986, the agency said.