Natural Gas Slips on Outlook for Faster Inventory Restocking

May 02, 2014 3:36 pm ET

May 2 (Bloomberg) -- Natural gas dropped for a third day in New York on speculation that the pace of refilling inventories from an 11-year low will increase as the weather warms.

Futures slid 1 percent. The Energy Information Administration said yesterday gas stockpiles rose by 82 billion cubic feet in the seven days ended April 25, compared with a five-year average increase of 58 billion. Commodity Weather Group LLC predicted mostly normal or higher-than-average temperatures in the lower 48 states from May 7 through May 16. Prices are down from a two-month high of $4.852 per million British thermal units on April 30.

“After yesterday’s injection, the pace of storage gains is going to strengthen,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “If we end up seeing mild spring weather, it’s going to be tough for the market to push above $5.”

Natural gas for June delivery fell 4.5 cents to settle at $4.674 per million British thermal units on the New York Mercantile Exchange. Volume for all futures traded was 34 percent below the 100-day average. The futures are up 10 percent this year and 0.6 percent this week.

The low in New York on May 9 may be 61 degrees Fahrenheit (16 Celsius), 9 above normal, and the high may be 74, according to AccuWeather Inc. in State College, Pennsylvania. Chicago temperatures may climb to 68 degrees.

Gas Users

About 49 percent of U.S. households use gas for heating, with the biggest share in the Midwest, EIA data show. Power plants account for 31 percent of gas consumption.

Gross gas output in the lower 48 states rose 0.1 percent in February to 75.37 billion cubic feet a day from a revised 75.32 billion the previous month, the U.S. said April 30 in its monthly EIA-914 production report. The “other states” category, which includes the Marcellus shale in the Northeast, gained 2.1% on new wells and improved weather.

Stockpiles may reach 3.414 trillion cubic feet by Nov. 7, the lowest for that time of year since 2005 and down 420 billion from a year earlier, Michael Hsueh, an analyst at Deutsche Bank AG in London, said in a note to clients today. Production growth hasn’t reached the level needed to reach 85 percent of working gas capacity, the percentage Deutsche Bank views as adequate.

“We believe upside risks have become somewhat more acute for the upcoming winter season,” Hsueh said. Working gas includes supplies available for delivery.