Natural gas futures in New York slid the most in more than six weeks on forecasts of moderating weather that would reduce demand for the heating fuel.
Gas fell 1.7 percent, the biggest drop since Feb. 14. MDA Weather Services in Gaithersburg, Maryland, said temperatures may be mostly higher than average in the eastern half of the U.S. from April 8 through April 17. The low in Chicago on April 14 may be 44 degrees Fahrenheit (7 Celsius), 3 above normal, and the high may reach 56, according to AccuWeather Inc.
“Temperatures are going to start to moderate and that’s putting some downward pressure on gas,” said Phil Flynn, senior market analyst at Price Futures Group in Chicago. “Once we get past this week’s inventory report, the weather may give us a little bit of a selloff.”
Natural gas for May delivery fell 6.9 cents to settle at $3.90 per million British thermal units on the New York Mercantile Exchange. The futures have climbed 16 percent this year. Trading volume was little changed from the 100-day average at 2:46 p.m. Open interest on Nymex was 1,459,808 contracts yesterday, reaching a record for a 12th consecutive day, according to CME Group Inc., which owns the exchange.
The discount of May contracts to October was unchanged at 12.7 cents. The discount of October to January was steady at 31.7 cents.
May $3.80 puts were the most active gas options in electronic trading. They rose 1.8 cents to 6.3 cents per million Btu on volume of 1,043 contracts as of 3:22 p.m. Puts accounted for 57 percent of options volume.
Implied volatility for at-the-money gas options expiring in May was 28.44 percent at 3:15 p.m., up from 28.42 percent yesterday. June options volatility was 27.17 percent, up from 26.99 percent.
The low in New York on April 14 may be 48 degrees, 4 higher than usual. About 50 percent of U.S. households use gas for heating, according to the Energy Information Administration, the statistical arm of the Energy Department.
A government report tomorrow may show gas stockpiles slid by 90 billion cubic feet in the week ended March 29, according to the median of 15 analyst estimates compiled by Bloomberg. That would be the biggest supply drop on record for the time of year, EIA data show. The agency’s weekly inventory report is scheduled for release at 10:30 a.m. tomorrow in Washington.
The five-year average supply change for the week is an increase of 4 billion cubic feet, according to the EIA. Stockpiles rose by 43 billion in the same week last year.
Gas inventories totaled 1.781 trillion cubic feet in the week ended March 22, 3.5 percent above the five-year average and 26.5 percent below last year’s total for the period. The year- on-year storage deficit was the widest in records going back to 2005. The surplus to the five-year average was the smallest since October 2011.
The number of rigs drilling for gas in the U.S. fell by 29 to 389 last week, according to data from Baker Hughes Inc. (BHI:US) in Houston. Gas rigs are at the lowest level since 1999.
The U.S. decreased its outlook for prices in a March 12 report. Gas prices at the benchmark Henry Hub in Erath, Louisiana, will average $3.41 per million Btu this year, lower than the previous estimate of $3.53, according to the EIA’s Short-Term Energy Outlook.
The forecast for total gas consumption fell to 70.02 billion cubic feet a day from 70.31 billion in the report. Rising prices will curtail gas demand from power generators, the agency said.
Gas output rose to an all-time high of 28.5 trillion cubic feet in 2011, led by record output from shale deposits, the EIA said in a report Jan. 7. Shale accounted for 30 percent of total production in 2011, up from 22 percent the previous year.
The boom in oil and natural gas production helped the U.S. cut its reliance on imported fuel. The U.S. produced 84 percent of its own energy in 2012, the most since 1991, EIA data show. The measure of self-sufficiency rose to 88 percent in December, the highest since February 1987.
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