Natural gas futures dropped the most in nine months in New York after a government report showed that U.S. stockpiles expanded by more than forecast.
Gas slid 7 percent, the biggest one-day decline since Aug. 2, after the Energy Information Administration said inventories rose 43 billion cubic feet in the week ended April 26 to 1.777 trillion cubic feet. Analyst estimates compiled by Bloomberg showed a gain of 29 billion. Unusually cold weather into early spring helped eliminate a supply glut that emerged in late 2011.
“It was a bearish injection and it may set the tone for future storage reports,” said Kent Bayazitoglu, an analyst at Gelber & Associates in Houston. “The big question is whether we’re going to start seeing mega-injections that really start to refill inventories.”
Natural gas for June delivery fell 30.1 cents to $4.025 per million British thermal units on the New York Mercantile Exchange, the lowest settlement price since April 9. Gas traded at $4.291 before the storage report was released at 10:30 a.m. in Washington. Trading volume was 56 percent above the 100-day average as of 2:4 p.m. Prices are down 3.1 percent this week, headed for the second straight decline.
The discount of May to October futures, a measure of supply expectations for the summer, widened 0.7 cent to 9.7 cents.
June $4 puts were the most active options in electronic trading, gaining 8.3 cents to 11.6 cents per million Btu on volume of 1,932 at 2:43 p.m. Puts accounted for 59 percent of trading volume.
Implied volatility for June at-the-money options was 32.71 percent at 2:30 p.m., up from 31.25 percent yesterday. Implied volatility for July options was 33.52 percent, up from 32.09 percent.
The stockpile increase was smaller than the five-year average gain for the week of 67 billion cubic feet, department data show. A deficit to the five-year average widened to 6.2 percent from 5.1 percent the previous week, the biggest such gap since February 2011. Supplies were 30.9 percent below year- earlier inventories, compared with 31.8 percent in last week’s report.
MDA Weather Services in Gaithersburg, Maryland, predicted mostly normal or higher-than-average temperatures in the lower- 48 states from May 7 through May 11.
The low in New York on May 8 may be 52 degrees Fahrenheit (11 Celsius), matching the normal reading, and the high may be 66, according to AccuWeather Inc. in State College, Pennsylvania. The low in Boston on May 8 may be 52 degrees Fahrenheit (11 Celsius), 4 more than usual, and the high may be 65.
About 50 percent of U.S. households use gas for heating, according to the Energy Information Administration, the statistical arm of the Energy Department. Power generation accounts for 33 percent of gas consumption.
The EIA’s monthly EIA-914 report on April 30 showed that gross gas production in the lower-48 states climbed 1.3 percent to 73.22 billion cubic feet a day in February from a revised 72.3 billion the previous month. It was the biggest percentage gain since October 2011 and the first increase in three months.
U.S. output rose 0.8 percent to 82.88 billion cubic feet a day from a revised 82.2 billion, the most since November.
“New wells were brought online in the Marcellus and Bakken Shales,” which drove the biggest volume gains, the EIA said in the report. Output in Texas, the top producing state, gained with new Eagle Ford shale wells while New Mexico production increased with warmer weather, the government said.
Gas production 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.
The relative strength index, or RSI, dropped to 46.17 as of 2:44 p.m., the least since February. A number above 70 is considered by some traders to be a signal to sell contracts while a number below 30 may be a sell signal. The RSI last traded above 70 on April 19.
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