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Natural Gas Fluctuates Near Five-Month Low on Mild U.S. Weather

By: Naureen S. Malik |

Natural gas fluctuated in New York after dropping to a five-month low as the outlook for unusually mild weather signaled reduced demand for the power-plant fuel.

The swung between gains and losses on forecasts that the Northeast and Midwest will see below-normal temperatures from Aug. 10 through Aug. 19, according to Commodity Weather Group LLC in Bethesda, Maryland. Prices have erased all of this year’s gains as U.S. stockpile increases topped five-year averages in seven of the past nine weekly government reports.

“We are not seeing strong heat,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “The making for a turnaround seems to be a little elusive right now. The market has priced in disappointing weather.”

Natural gas for September delivery fell 0.2 cent to $3.345 per million British thermal units at 9:31 a.m. on the New York Mercantile Exchange after dropping to $3.314, the lowest intraday price since Feb. 22. Trading was 37 percent below the 100-day average. Gas has fallen 0.2 percent this year.

The discount of September to October futures narrowed 0.2 cent to 2.6 cents.

The high temperature in Chicago on Aug. 15 may be 72 degrees Fahrenheit (22 Celsius), 10 below normal, and Washington’s reading may be 2 lower than the average at 85 degrees, according to AccuWeather Inc. in State College, Pennsylvania.

Power Plants

Electricity generators, the largest consumers of U.S. gas, will account for 32 percent of demand this year, data show from the Energy Information Administration, the Energy Department’s statistical arm.

“The weather has turned into a bust for the bulls,” John Kilduff, partner at Again Capital LLC and editor of the Energy OverView newsletter in New York, wrote today. “The clock is running out fast on the ability of the summer season to produce a sustained blast of successive heat waves. Look for prices to fall further, as the bearish elements pile up.”

Gas inventories rose 59 billion cubic feet to 2.845 trillion in the week ended July 26, above the five-year average injection of 47 billion for the period, the EIA said last week. A deficit to five-year average supplies narrowed to 1.2 percent from 1.6 percent the previous week.

September $3.45 calls were the most active options in electronic trading. They were down 0.3 cent at 6.2 cents per million Btu on volume of 66 at 9:41 a.m. Calls accounted for 70 percent of trading volume. Implied volatility for at-the-money options expiring in September was 31.74 percent at 9:30 a.m., compared with 30.86 percent on Aug. 2.