Natural Gas Heads for Weekly Drop on Mild Weather

Natural gas futures capped a third straight weekly decline in New York as mild weather narrowed a supply deficit.

Gas stockpiles were 9.1 percent below the five-year average in the week ended Oct. 17, down from a record 55 percent at the end of March, government data show. A midday update to the government’s Global Forecast System weather model showed a mixed outlook for next week after above-normal temperatures through Oct. 28.

“The lack of seasonal demand and the amount of gas we’re putting in the ground continue to depress the market,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “We could even see another triple-digit storage injection before the winter.”

Natural gas for November delivery rose 0.1 cent to settle at $3.623 per million British thermal units on the New York Mercantile Exchange. Gas slipped to $3.558 per million Btu in intraday trading, the lowest since Nov. 20. Volume for all futures traded was 0.7 percent below the 100-day average at 2:35 p.m. Gas is down 14 percent this year and 3.8 percent this week.

The low in Chicago on Oct. 27 may be 54 degrees Fahrenheit (12 Celsius), 12 above average, according to AccuWeather Inc. in State College, Pennsylvania.

About 49 percent of U.S. households use gas for heating, according to the Energy Information Administration, the Energy Department’s statistical arm.

“Traders are showing a growing reluctance to push prices lower until we see what winter weather is going to be like,” McGillian said.

Supply Report

Gas inventories rose 94 billion cubic feet in the week ended Oct. 17 to 3.393 trillion, surpassing the five-year average gain of 70 billion for the period, the EIA said yesterday.

“Two more weeks remain in the official injection season, but robust injection levels throughout the whole season support continued injections until the second or third week in November,” Bill Herbert, an analyst at Simmons & Co. in Houston, said in a note to clients today.

Marketed gas production will climb 5.4 percent this year to average 73.98 billion cubic feet a day, representing the biggest volume and percentage increases since 2011, the EIA said Oct. 7 in its monthly Short-Term Energy Outlook.

The U.S. cut its 2014 gas price forecast for Henry Hub in Louisiana, the benchmark for New York futures, to $4.45 per million Btu from the previous estimate of $4.46. Average prices will drop 14 percent next year to $3.84, the report said.

Gas output from the Marcellus shale formation in the Northeast may advance 1.4 percent next month to 16 billion cubic feet a day, the agency said Oct. 14 in its monthly Drilling Productivity Report.

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