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Natural Gas Futures Fluctuate on Forecasts for Cooler Weather

By: Christine Buurma |

Natural gas futures fluctuated in New York amid forecasts for milder weather that would reduce demand for electricity generation.

Gas moved between gains and losses as Commodity Weather Group LLC in Bethesda, Maryland, said temperatures may be mostly normal on the East Coast through Sept. 26. The high in New York on Sept. 23 may be 72 degrees Fahrenheit (22 Celsius), 1 lower than usual, according to AccuWeather Inc. in State College, Pennsylvania.

“We have six weeks ahead of the fall shoulder season, when gas demand is muted,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “Unless we start to see forecasts of early cold, it doesn’t seem like we’ll have strong seasonal demand.”

Natural gas for October delivery rose 0.1 cent to $3.739 per million British thermal units at 10:50 a.m. on the New York Mercantile Exchange after rising to $3.776 per million Btu, the highest since July 24. Trading volume was 32 percent above the 100-day average. Prices are up 12 percent this year.

The discount of October to November futures widened 0.1 cent to 7.1 cents. October gas traded 30.5 cents below the January contract, compared with 30.3 cents yesterday.

October $3.50 puts were the most active options in electronic trading. They were 0.1 cent lower at 0.7 cent per million Btu on volume of 515 at 10:42 a.m. Puts accounted for 54 percent of trading volume. Implied volatility for October at-the-money options was 29.73 percent at 10:45 a.m., compared with 29.12 percent yesterday

Seasonal Weather

The high in Washington on Sept. 23 may be 76 degrees, 1 lower than usual, AccuWeather data show.

Power generation accounts for 32 percent of U.S. gas demand, according to the Energy Information Administration, the Energy Department’s statistical arm.

An EIA report scheduled for release on Sept. 19 may show stockpiles rose by 59 billion cubic feet in the week ended Sept. 13, compared with the five-year average gain of 74 billion, according to the median of five analyst estimates compiled by Bloomberg.

Gas inventories totaled 3.253 trillion cubic feet in the week ended Sept. 6, 1.4 percent above the five-year average and 5 percent below last year’s supplies, EIA data show.

Marketed natural gas production may rise 1.1 percent this year to a record 69.91 billion cubic feet a day, the EIA said Sept. 10 in its Short-Term Energy Outlook. The agency increased its forecast from 69.89 billion last month.
The U.S. met 87 percent of its own energy needs in the first five months of 2013, on pace to be the highest annual rate since 1986, according to the EIA.

An area of low pressure over Belize and the southern Yucatan Peninsula may drift over the southwestern Gulf of Mexico later in the week, the National Hurricane Center in Miami said in an 8 a.m. outlook. The system has a 50 percent chance of becoming a tropical cyclone during the next five days.

The Gulf of Mexico will account for 5.6 percent of U.S. gas production this year, EIA data show.