Natural gas futures dropped for the first time in six days on forecasts of warmer-than-normal weather that would reduce consumption of the heating fuel.
Gas declined 3.5 percent after forecasters including MDA EarthSat Weather predicted normal or above-normal temperatures across most of the lower 48 states through Oct. 24. Heating demand may be 28 percent below normal from Oct. 21 through Oct. 25, according to Weather Derivatives in Belton, Missouri.
“Without early heating-season demand, the market is starting to balance out,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “The buyers are bailing out.”
Natural gas for November delivery fell 12.5 cents to settle at $3.486 per million British thermal units on the New York Mercantile Exchange. The futures are down 5.9 percent from a year ago. Gas rose to $3.611 per million Btu on Oct. 12, the highest settlement price since Dec. 1.
November $3.80 calls, bets that prices will rise, were the most active gas options in electronic trading. They were 2.5 cents lower at 1.3 cents on volume of 564 contracts as of 1:59 p.m. Calls accounted for 59 percent of options volume.
The low in New York on Oct. 24 may be 45 degrees Fahrenheit (7 Celsius), 3 below normal, according to AccuWeather Inc. in State College, Pennsylvania. About 50 percent of U.S. households use gas for heating, Energy Department data show.
September tied for being the warmest in records going back to 1880, according to the U.S. National Oceanic and Atmospheric Administration. The global average temperature for September was 60.21 degrees Fahrenheit (15.67 Celsius), tying 2005 as the warmest on record, NOAA said in a report today.
The winter of 2012-13 may be the second consecutive winter to produce below-normal heating demand, while failing to reach the high temperatures of the 2011-2012 season, MDA EarthSat predicted in an Oct. 2 outlook.
The winter, measured by meteorologists as running from December through February, will probably have temperatures higher than the 10- and 30-year normal ranges, according to MDA in Gaithersburg, Maryland. The result may be that below-normal amounts of natural gas, heating oil and electricity will be needed to warm homes and businesses, MDA said.
The boom in oil and natural gas production helped the U.S. cut its reliance on imported fuel. America met 83 percent of its energy needs in the first six months of the year, Energy Department data show. If the trend goes on through 2012, it will be the highest level of self-sufficiency since 1991.
U.S. natural gas production in 2012 will average a record 68.85 billion cubic feet a day, up 4 percent from last year, the department said, the department said Oct. 10 in its monthly Short-Term Energy Outlook. Inventories may climb to a record 3.903 trillion cubic feet by Oct. 31.
The number of rigs drilling for natural gas in the U.S. fell by 15 to 422 last week, the lowest level since June 1999, according to data released Oct. 12 by Baker Hughes Inc. in Houston. The rig count is down 48 percent this year.
Hedge funds raised bullish bets on natural gas to the highest level since August as a shrinking U.S. supply glut, slowing production growth and increasing power-plant demand pushed futures to a 10-month high.
The U.S. may become a net exporter of natural gas by the end of this decade, earlier than the government’s 2022 estimate, as producers extract more gas from shale, the head of the Energy Information Administration said. Administrator Adam Sieminski made the comments today at an U.S. Chamber of Commerce event in Washington.
Money managers boosted net-long positions, or wagers on rising prices, by 9.5 percent to 151,942 in the week ended Oct. 9, according to the Commodity Futures Trading Commission’s Commitments of Traders report on Oct. 12. They were the most since the seven days ended Aug. 14.
Gas futures volume in electronic trading on the Nymex was 314,122 as of 2:49 p.m., compared with the three-month average of 394,000. Volume was 383,309 on Oct. 12. Open interest was 1.19 million contracts. The three-month average is 1.11 million.
The exchange has a one-business-day delay in reporting full volume and open interest data.
----With assistance from Asjylyn Loder in New York, Brian K. Sullivan in Boston and Brian Wingfield in Washington. Editors: Bill Banker, Richard Stubbe
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