Oct. 2 (Bloomberg) -- Natural gas futures dropped in New York for the second time this week on speculation that mild weather will accelerate the pace of U.S. inventory increases.
Gas fell 1.9 percent. U.S. stockpiles expanded by 95 billion cubic feet last week, based on the median of 16 analyst estimates compiled by Bloomberg. The five-year average gain for the seven days is 82 billion cubic feet, according to the Energy Information Administration, which is scheduled to release its weekly supply report tomorrow.
“With waning air-conditioning demand we are seeing a rise in inventory injections,” said Teri Viswanath, director of commodities strategy at BNP Paribas SA in New York. “The tug of war is whether investors should stay present in the current well-supplied market or look at ahead at what will likely be heavier heating demand in the fourth quarter.”
Natural gas for November delivery slid 6.7 cents to settle at $3.542 per million British thermal units on the New York Mercantile Exchange. Trading volume was 17 percent below the 100-day average at 2:37 p.m. Prices have climbed 5.7 percent this year.
The discount of November to December futures widened 0.4 cent to 16 cents. November gas traded 26.1 cents below the January contract, compared with 25.3 cents yesterday.
November $3.55 puts were the most active options in electronic trading. They were 2.5 cents higher at 11.6 cents per million Btu on volume of 900 at 2:54 p.m. Puts accounted for 65 percent of trading volume. Implied volatility for November at- the-money options was 29.84 percent at 2:45 p.m., compared with 30.42 percent yesterday.
The amount of gas injected into storage caverns picked up in late September as temperatures dropped.
U.S. stockpiles totaled 3.386 trillion cubic feet in the week ended Sept. 20, 0.9 percent above the five-year average for the period, the EIA said last week. The surplus to the average widened from 0.5 percent the previous week. A deficit versus year-earlier levels narrowed to 5 percent from 5.4 percent.
Gas futures rose in earlier trading on speculation that a weather system brewing in the Caribbean would strengthen as it moved into the Gulf of Mexico, disrupting offshore output. The storm has a 70 percent chance of becoming a tropical storm in the next 48 hours, the National Hurricane Center said in a 2 p.m. advisory.
The cluster of storms near Mexico’s Yucatan Peninsula poses a “very low” threat to oil and gas output in the Gulf even if it gains strength, said Matt Rogers, president of the Commodity Weather Group LLC in Bethesda, Maryland.
While the storm may trigger precautionary evacuations, “upcoming Yucatan land interaction and high Gulf wind shear should weaken the system before it reaches the production region,” Rogers said in an e-mail.
BP Plc is evacuating non-essential personnel from four production platforms it operates in deep waters of the Gulf, the company said in a website notice.
Destin Pipeline Company LLC is evacuating all non-essential personnel from gas lines operated by BP in the central and eastern Gulf as part of a severe weather plan, the company said in a website notice. The Destin and Okeanos pipelines will continue to accept flow as long as weather conditions permit, the company said.
The 100-mile Okeanos line offshore Louisiana, which extends from Mississippi Canyon Block 778 to the Main Pass 260 Block to connect with the Destin line, has a capacity of 1 billion cubic feet a day, according to BP’s website. Destin’s capacity is 1.2 billion and flows to Pascagoula, Mississippi, where it then connects to six interstate gas lines.
The Gulf will account for 5.6 percent of U.S. gas production this year, down from 14 percent in 2007, according to the EIA. The region’s share of gas output has declined amid rising supplies from shale deposits in the lower 48 states.
Above-normal temperatures from the East Coast through the Midwest will linger through the weekend before easing next week, Jim Southard, meteorologist with Frontier Weather Inc. in Tulsa, Oklahoma, said in an e-mail late yesterday. Cities from Washington to Boston will see the warmest weather for today’s date since 2002, he said.
The high in Washington today may be 86 degrees Fahrenheit (30 Celsius), 13 above normal, and New York may be 16 higher than usual at 85 degrees, according to AccuWeather Inc. in State College, Pennsylvania. Chicago’s high will be 10 above average at 78 degrees.
Mild overnight lows in the Midwest and the Northeast “should also curtail the need for people to run their heat,” Southard said.
--With assistance from Lynn Doan in San Francisco and Eliot Caroom in New York. Editors: Bill Banker, Charlotte Porter