By Naureen S. Malik - Sep 26, 2013 11:30 PM GMT+0400
Natural gas futures rebounded from a five-week low in New York as traders closed out positions with today’s expiration of October contracts. Prices dropped earlier on a larger-than-average U.S. stockpile increase.
Gas rose 0.1 percent before November contracts take over as the front-month lots tomorrow. Futures had dropped as much as 2.6 percent after the Energy Information Administration said last week’s stockpile gain was the biggest in seven weeks.
“It was mostly due to the expiration of the contract, people were short and they were getting out,” said Cindy Wexler, an independent gas trader on the floor of the New York Mercantile Exchange. “It was a bearish number. However, we had been down 30 cents in the last week and it was a bit overdone. The $3.50 level is a technical support area.”
Natural gas for October delivery rose 0.5 cent to settle at $3.498 per million British thermal units on the New York Mercantile Exchange after sliding to $3.402, the lowest intraday price since Aug. 21. Trading volume was 68 percent above the 100-day average at 2:39 p.m. Prices have dropped 1.9 percent this quarter and gained 4.4 percent this year.
The more actively-traded November contract gained 2.1 cents to $3.567 per million Btu. The discount of October to November futures widened 1.6 cents to 6.9 cents. October gas traded 35.5 cents below the January contract, compared with 32.4 cents yesterday.
Options Trading
January $3 puts were the most active options in electronic trading. They slid 0.1 cent to 1.3 cents per million Btu on volume of 1,135 at 3 p.m. Puts accounted for 54 percent of trading volume. Implied volatility for November at-the-money options was 29.33 percent at 3 p.m., compared with 30.07 percent yesterday.
U.S. inventories rose 87 billion cubic feet to 3.386 trillion in the week ended Sept. 20. The increase was the largest since Aug. 2. Analyst estimates compiled by Bloomberg predicted a gain of 79 billion.
“It’s a big number, no doubt,” said Teri Viswanath, director of commodities strategy at BNP Paribas SA in New York. “There is not a lot of demand. The current restocking under way is representative of a well-supplied market.”
The stockpile increase was bigger than the five-year average gain for the period of 75 billion cubic feet, EIA data show. A surplus to the five-year average widened to 0.9 percent from 0.5 percent the previous week. Supplies were 5 percent below year-earlier inventories, compared with 5.3 percent a week earlier.
Fuel Use
The pace of seasonal gas stockpiling had slowed from mid-August through mid-September as a late burst of summer heat spurred demand for the power-plant fuel to run air conditioners.
“The weather forecast for the next two weeks is expected to be just right, above average, that is, in the northern half of the country,” which means neither heaters or air-conditioners will be called up for duty, John Kilduff, partner at Again Capital LLC and editor of the Energy OverView newsletter in New York, wrote today. “So, the demand picture remains quite weak.”
Temperatures will be above-normal from the East Coast through the Midwest and in the Southwest from Oct. 1-5 before giving way to more seasonal readings the following five days, said Commodity Weather Group LLC in Bethesda, Maryland.
The high in New York City on Oct. 1 may be 74 degrees Fahrenheit (23 Celsius), 5 above normal, then drop to the high 60s the following week, according to AccuWeather Inc. in State College, Pennsylvania.
Power Generation
Power generation accounts for 32 percent of U.S. gas demand, said the EIA, the Energy Department’s statistical arm. About 50 percent of U.S. households use gas for heating.
U.S. gas production may rise 1.1 percent this year to a record 69.91 billion cubic feet a day, gaining for the sixth straight year as new wells come online at shale deposits such as the Marcellus in the Northeast, 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 six months of 2013, on pace to be the highest annual rate since 1986, the agency said.
To contact the reporter on this story: Naureen S. Malik in New York at nmalik28@bloomberg.net
To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net
