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Natural Gas Declines on Forecasts for Cooler Late-July Weather

July 15, 2013

July 15 (Bloomberg) -- Natural gas futures slipped in New York on forecasts that a heat wave this week will give way to moderating weather later in the month that would limit consumption of the fuel by power plants.

Gas dropped as much as 2.7 percent as Commodity Weather Group LLC in Bethesda, Maryland, said above-normal temperatures in the Northeast this week would be replaced by cooler weather. The high in New York on July 22 may be 84 degrees Fahrenheit (29 Celsius), matching the usual reading, according to AccuWeather Inc. in State College, Pennsylvania. Temperatures will rise into the 90s this week in New York.

"The weather forecasts are moderating and taking away some support for gas prices," said Phil Flynn, a senior market analyst at Price Futures Group in Chicago. "There hasn’t been a lot of certainty around the temperature outlook."

Natural gas for August delivery fell 5.7 cents, or 1.6 percent, to $3.587 per million British thermal units at 1:38 p.m. on the New York Mercantile Exchange. Trading volume was 13 percent below the 100-day average. The futures rose as high as $3.689 in earlier trading before retreating. Prices have climbed 7 percent this year.

The discount of August to October futures narrowed 0.3 cent to 1.1 cents.

October $2.70 puts were the most active options in electronic trading. They were 0.1 cent higher at 0.8 cent per million Btu on volume of 3,085 at 1:39 p.m. Puts accounted for 56 percent of trading volume. Implied volatility for at-the- money options expiring in August was 30.19 percent at 1:30 p.m., compared with 28.22 percent on July 12.


Hedge Funds


Hedge funds reduced net-long wagers on four U.S. natural gas contracts for a sixth week in the seven days ended July 9, the Commodity Futures Trading Commission said July 12.

The measure includes an index of four contracts adjusted to futures equivalents: Nymex natural gas futures, Nymex Henry Hub Swap Futures, Nymex ClearPort Henry Hub Penultimate Swaps and the ICE Futures U.S. Henry Hub contract. Henry Hub, in Erath, Louisiana, is the delivery point for Nymex futures, a benchmark price for the fuel.

The high in Chicago on July 22 may be 81 degrees Fahrenheit, 3 below normal, AccuWeather data show.

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