Natural gas futures slid after trading at an 18-month high above $4 in New York following a government report showing that U.S. stockpiles declined by less than expected last week.
Gas slipped as much as 1.7% after rising to $4.025 per million British thermal units, the highest price since Sept. 15, 2011. Energy Information Administration data showed that inventories fell 62 billion cubic feet in the week ended March 15 to 1.876 trillion cubic feet. Analyst estimates compiled by Bloomberg showed an expected withdrawal of 70 billion.
“It’s the first bearish storage number we’ve had in a while, so you would expect to see some selling,” said Kent Bayazitoglu, an analyst at Gelber & Associates in Houston. “The market may not be ready to sustain this $4 pricing.”
Natural gas for April delivery fell 3.9 cents, or 1%, to $3.921 per million British thermal units at 1:21 p.m. on the New York Mercantile Exchange. Volume was more than double the 100-day average for the time of day. Gas traded at $3.698 before the storage number was released at 10:30 a.m. in Washington.
The futures have climbed 17% this year, the second- best performer after cotton on the Standard & Poor’s GSCI spot index of 24 commodities.
The discount of April contracts to October, a gauge of summer demand for gas, narrowed widened 0.9 cent to 12.2 cents at 1:13 p.m. The discount of October to January contracts widened 0.5 cent to 30.5 cents.
Options Trading
April $4 calls were the most active gas options in electronic trading. They dropped 2.9 cents to $1.8 cents per million Btu on volume of 1,357 contracts as of 1:33 p.m. Calls accounted for 48% of options volume.
The stockpile decrease was bigger than the five-year average decline for the week of 26 billion cubic feet, department data show. A surplus to the five-year average fell to 9.5% from 11.4% the previous week. Supplies were 21.1% below year-earlier inventories, compared with 18.5% in last week’s report.
WSI Corp. in Andover, Massachusetts, said temperatures may be mostly normal or warmer-than-average in the lower 48 states from March 31 through April 4. About 50% of U.S. households use gas for heating, according to EIA data.
The low in New York on April 3 may be 43 degrees Fahrenheit (6 Celsius), 2 more than the usual reading, according to AccuWeather Inc. in State College, Pennsylvania. Cleveland may see 44 degrees, 7 higher than the norm.
Price Outlook
The U.S. decreased its outlook for prices in a March 12 report. Gas prices at the benchmark Henry Hub in Erath, Louisiana, will average $3.41 per million British thermal units this year, lower than the previous estimate of $3.53, according to the EIA’s Short-Term Energy Outlook.
The forecast for total gas consumption fell to 70.02 billion cubic feet a day from 70.31 billion. Rising prices will curtail gas use for power generation, the agency said.
Gas output rose to an all-time high of 28.5 trillion cubic feet in 2011, led by record output from shale deposits, the EIA said in a report Jan. 7. Shale accounted for 30% of total production in 2011, up from 22% the previous year.
The boom in oil and natural gas production helped the U.S. cut its reliance on imported fuel. America met 84% of its energy needs in the first 11 months of last year, government data show. If the trend continued through 2012, it will be the highest level of self-sufficiency since 1991.
