Natural Gas Slips From One-Month High on Milder Weather

Natural gas futures slipped from a one-month high in New York as cooler weather in the central U.S. limited demand for the power-plant fuel.

Gas fell 1.4 percent. MDA Weather Services predicted below-normal temperatures from the Midwest to Texas over the next five days, with unusually high readings on the East and West coasts. Gas inventory gains topped the five-year average for the past seven weeks during a seasonal demand lull.

“It’s a cooler pattern emerging of very little cooling demand in the midcontinent,” said Teri Viswanath, director of commodities strategy at BNP Paribas SA in New York. “A broad swath of the U.S. is going to have very light demand this week and possibly into next week.”

Natural gas for July delivery fell 6.5 cents to settle at $4.645 per million British thermal units on the New York Mercantile Exchange after touching $4.743, the highest intraday price since May 8. Volume for all futures traded was 4 percent above the 100-day average at 2:41 p.m. Gas is up 9.8 percent this year.

Above-average temperatures will spread across most of the East Coast into Texas and California from June 14 through June 18, said MDA in Gaithersburg, Maryland. The warmth will stay in Texas, the West Coast and around the Great Lakes during the following five days, with seasonal readings elsewhere.

Weather Outlook

Dallas’s high temperature tomorrow will be 84 degrees Fahrenheit (29 Celsius), 7 below normal, and then climb two weeks later to 100, 7 above average, according to AccuWeather Inc. in State College, Pennsylvania.

Power plants account for 31 percent of gas consumption, according to the U.S. Energy Information Administration, the Energy Department’s statistical arm.

Rising temperatures will boost demand for natural gas in mid-June, which “could have a negative impact on the weekly injections” of gas into storage, Dominick Chirichella, senior partner at the Energy Management Institute in New York, said in a note to clients today.

A widening premium for gas versus year-earlier levels suggests “the industry seems less relaxed that the recent pattern of above-normal injections over the last several weeks will continue throughout the season,” he said. Gas futures are up 21 percent from a year ago, rebounding after the premium had narrowed to 6.7 percent on May 21.

Inventory Estimates

U.S. inventories probably expanded by 114 billion cubic feet last week, Tim Evans, an energy analyst at Citi Futures in New York, wrote in note to clients today. Chirichella’s projection is for an increase of 109 billion. The five-year average for the period is 88 billion.

Stockpiles totaled 1.499 trillion cubic feet in the seven days ended May 30, the lowest level for the time of the year since 2003, EIA data show. Supplies were 37 percent below the five-year average and 33 percent lower than year-earlier levels.

Enbridge Inc.’s Manta Ray gas pipeline lifted a force majeure at the Sea Robin interconnection and said delivery nominations will resume today, according to a website notice. Volumes were halted after the company yesterday reported “operational issues” at the Sea Robin ST 292 deliver meter.

Manta Ray, which has 800 million cubic feet of capacity, gathers gas from the Gulf of Mexico, while Energy Transfer Partners LP’s Sea Robin pipeline system delivers offshore supplies to processing plants and markets in in Louisiana.

Gas supplies will expand to an all-time high for the fourth consecutive year as new wells come online at shale deposits such as the Marcellus in the Northeast, according to the EIA.

Marcellus output will increase 1.9 percent to 14.98 billion cubic feet a day in July from the previous month, the EIA said today in its monthly Drilling Productivity Report. July output will be 26 percent higher than year-earlier levels.

Record gas production will help boost U.S. inventories to 3.405 trillion cubic feet by the end of October, which would be the lowest level at the start of a heating season since 2008, government estimates show.

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