Aug. 13 (Bloomberg) -- Natural gas futures declined in New York for the second time in three days on speculation that mild weather will expand a U.S. stockpile surplus.
Gas dropped 0.8 percent as government data scheduled for release Aug. 15 may show that inventories rose 71 billion cubic feet last week, based on the median of 10 analyst estimates compiled by Bloomberg. The five-year average gain for the period is 42 billion. The weather may be normal or cooler than average in most of the eastern U.S. through Aug. 21, according to Commodity Weather Group LLC.
“There wasn’t a lot of extreme heat last week, so we may see a storage number above and beyond what we would usually see,” said Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York. “This market is working on the downside.”
Natural gas for September delivery fell 2.5 cents to settle at $3.285 per million British thermal units on the New York Mercantile Exchange. Trading volume was 59 percent above the 100-day average at 2:39 p.m. Prices are up 20 percent from a year ago.
The discount of September to October futures widened 0.2 cent to 2.7 cents. October gas traded 40.3 cents below the January contract, compared with 40.1 cents yesterday
September $3.15 puts were the most active options in electronic trading. They were 0.1 cent lower at 2.9 cents per million Btu on volume of 812 at 2:458 p.m. Puts accounted for 81 percent of trading volume. Implied volatility for at-the-money options expiring in September was 32.16 percent at 2:30 p.m., compared with 33.15 percent yesterday.
Gas stockpiles totaled 2.941 trillion cubic feet in the week ended Aug. 2, or 0.7 percent above the five-year average, rising to a surplus for the first time since March. Inventories were 9.2 percent below year-earlier supplies.
The high in New York on Aug. 21 may be 79 degrees Fahrenheit (26 Celsius), 3 lower than usual, according to AccuWeather Inc. in State College, Pennsylvania. Temperatures in Boston may also reach 79, matching the normal reading.
Power generation accounts for 32 percent of U.S. gas demand, according to the Energy Information Administration, the Energy Department’s statistical arm.
Northeast natural gas prices may drop as supplies rise, said Stefan Revielle, an analyst at Credit Suisse in New York, in a note to clients today.
“Breakneck” production growth in the Marcellus formation has caused Northeast hub prices to decline relative to the benchmark Henry Hub in Louisiana, Revielle said. Pipeline capacity to the region may climb 6.6 billion cubic feet a day through 2014, he said.
Lower-48 state natural gas output was little changed in May as new wells began operating in the Northeast’s Marcellus shale formation while Wyoming production declined during scheduled maintenance, government data showed.
Gross gas production in the contiguous states totaled 73.37 billion cubic feet a day, compared with a revised 73.38 billion in April, the EIA’s monthly EIA-914 report showed July 31.
The U.S. met 87 percent of its own energy needs in the first four months of 2013, on pace to be the highest annual rate since 1985, according to EIA data.
--Editors: Bill Banker, Charlotte Porter