Bloomberg News

Natural Gas Futures Slide to 7-Month Low on Mild Weather

July 21, 2014

Natural gas futures slipped in New York to the lowest price in more than seven months as meteorologists predicted mild weather, which would curtail demand from power plants and help narrow a stockpile deficit.

Temperatures may be average or below normal in the eastern half of the U.S. through Aug. 4, according to Commodity Weather Group LLC. Injections of gas into storage have surpassed the five-year average for 13 consecutive weeks. Inventories were 26 percent below the five-year average in the week ended July 11, compared with 55 percent at the end of March.

“We’re seeing some cool weather on the East Coast in the 10-day forecasts,” said Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York. “We’ve had some pretty big storage numbers that have been leaning on prices.”

Natural gas for August delivery fell 10.2 cents, or 2.6 percent, to $3.849 per million Btu on the New York Mercantile Exchange, the lowest settlement since Nov. 26. Volume for all futures traded was 25 percent above the 100-day average at 3:03 p.m. Prices are down 9 percent this year.

Money managers’ net-long wagers on U.S. natural gas dropped 3.1 percent to 226,861 in the week ended July 15, the least since December, the Commodity Futures Trading Commission said in its July 18 Commitments of Traders report. 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.

Record Production

Marketed gas output may increase 4.1 percent this year to an all-time high of 73.08 billion cubic feet a day, according to the Energy Information Administration, the Energy Department’s statistical arm. Record production will bring stockpiles to 3.43 trillion cubic feet by the end of October, which would be the least for that time of year since 2008, the EIA said July 8 in its monthly Short-Term Energy Outlook.

Supply from the Marcellus shale formation in the Northeast will climb 1.6 percent to 15.482 billion cubic feet a day in August from a month earlier, the EIA said July 14 in its Drilling Productivity Report.

The high in Chicago on July 29 may be 73 degrees Fahrenheit (23 Celsius), 9 less than average, according to AccuWeather Inc. in State College, Pennsylvania. Atlanta temperatures may reach 82 degrees, 6 below normal.

Power plants account for 31 percent of gas consumption, EIA data show.

Cooler Weather

“Weather models are now indicating that it will be cooler than normal throughout for the rest of July and first half of August, a time when we usually see the largest amount of cooling demand,” Aaron Calder, an analyst at Gelber & Associates in Houston, said in a note to clients today. “The market is worried that the summer will never come.”

The Alaska LNG project filed an application with the Energy Department to export as much as 20 million metric tons annually of liquefied natural gas from the Kenai Peninsula, according to a press release today.

Project participants include TransCanada Corp., BP Plc, ConocoPhillips and ExxonMobil Corp. The preliminary engineering and design phase of the project, which will help determine whether the project will go forward, is scheduled for completion in 2016.

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

To contact the editors responsible for this story: David Marino at dmarino4@bloomberg.net Bill Banker, Charlotte Porter


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