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Natural Gas Futures Decline on Forecasts for Milder Weather

October 29, 2013

Oct. 29 (Bloomberg) -- Natural gas futures declined to a three-week low on forecasts for moderating temperatures that would limit heating and electricity consumption.

Gas slid as much as 1.3 percent. Commodity Weather Group LLC in Bethesda, Maryland, said temperatures would be mostly normal in the eastern two-thirds of the U.S. from Nov. 3 through Nov. 12. The low in New York on Nov. 6 may be 45 degrees Fahrenheit (7 Celsius), 1 more than usual, according to AccuWeather Inc. in State College, Pennsylvania.

"The weather is not as cold as people thought it was going to be, and now it’s actually going to warm up a little bit," said Phil Flynn, a senior market analyst at Price Futures Group in Chicago. "There’s a lot of downward pressure on the market right now."

Natural gas for November delivery fell 3.4 cents, or 1 percent, to $3.535 per million British thermal units at 12:29 p.m. on the New York Mercantile Exchange. Trading volume was 20 percent below the average for the time of day. Prices have climbed 5.5 percent this year. The futures dropped to $3.523 in intraday trading, the lowest since Oct. 7.

The November contract expires today. The more actively traded December contract was down 2.2 cents, or 0.6 percent, to $3.639 per million Btu.

The discount of November to December futures widened 1.2 cents to 10.4 cents. November gas traded 18.5 cents below the January contract, compared with 17 cents yesterday.

 

Options Trading

 

December $3.50 puts were the most active options in electronic trading. They climbed 0.5 cent to 6.3 cents per million Btu on volume of 391 at 12:29 p.m. Puts accounted for 44 percent of trading volume. Implied volatility for December at- the-money options was 30.83 percent, little changed from yesterday.

The low in Columbus, Ohio, on Nov. 7 may be 40 degrees Fahrenheit, 1 above average, AccuWeather data show. About 49 percent of U.S. households use gas for heating, according to the Energy Information Administration, the Energy Department’s statistical arm.

An EIA report due on Oct. 31 may show gas stockpiles expanded by 34 billion cubic feet in the week ended Oct. 25, according to the median of four analyst estimates compiled by Bloomberg. The five-year average increase for the period is 57 billion. Supplies rose by 66 billion in the same week last year.

Inventories totaled 3.741 trillion cubic feet in the week ended Oct. 18, EIA data show. Supplies were 2.1 percent above the five-year average and 2.4 percent below year-earlier stockpiles.

 

Production Growth

 

The Marcellus shale formation is driving gas production growth in the U.S., the EIA said Oct. 22 in the first edition of its Drilling Productivity Report. Output from the region may increase by 408 million cubic feet per day, or 3.3 percent, to 12.6 billion from October to November, according to the report.

Marketed gas production may climb 1.2 percent this year to a record 70 billion cubic feet a day, the EIA said Oct. 8 in its monthly Short-Term Energy Outlook.

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, according to the EIA.

The number of rigs drilling for natural gas in the U.S. rose by four to 376 last week, data released Oct. 25 by Baker Hughes Inc. in Houston showed. The total is down 13 percent this year.

Clean Energy Fuels Corp., the transportation-fuel company co-founded by billionaire investor T. Boone Pickens, said it plans to build the first terminal to supply liquefied natural gas to cargo ships in the U.S.

The plant in Jacksonville, Florida, will supply as much as 300,000 gallons a day by 2016, Greg Roche, vice president for national accounts, said by phone today. Clean Energy’s partners for the project are General Electric Co. and Ferus Natural Gas Fuels, a closely-held Calgary-based company. The consortium is called Eagle LNG Partners.

 

--With assistance from Isaac Arnsdorf in New York. Editors: Charlotte Porter, Richard Stubbe

 

To contact the reporter on this story: Christine Buurma in New York at cbuurma1@bloomberg.net;

 

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net

 

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