Natural gas futures fell the most in two weeks in New York after a government report showed that a U.S. stockpile increase exceeded forecasts.
Gas fell as much as 3.8% after the Energy Information Administration said inventories rose 99 billion cubic feet in the week ended May 10 to 1.964 trillion. Analyst estimates compiled by Bloomberg showed a gain of 95 billion.
“This is the third consecutive weekly miss so the injections are coming in higher than expected,” said Teri Viswanath, director of commodities strategy at BNP Paribas SA in New York. “We may find ourselves back above the $4 watermark by the end of the day. Right now the weather maps appear warm.”
Natural gas for June delivery fell 13.4 cents, or 3.3%, to $3.936 per million British thermal units at 11:29 a.m. on the New York Mercantile Exchange. If the market settles there it would be the biggest one-day decline since May 2. Futures trading volume was 37% above the 100-day average for the time of day. Prices are up 17% this year.
June $4.80 calls were the most-active option in electronic trading. They were unchanged at 0.2 cent per million Btu on volume of 5,028 at 11:19 a.m. June $4.30 calls were the next- most active, falling 2.1 cents to 0.8 cent on volume of 905. Calls accounted for 63% of trading.
Implied volatility for at-the-money options expiring in June was 30.57% at 11:15 a.m., down from 32.58% yesterday. Volatility for July options was 31.17%, compared with 32.31% yesterday.
The discount of June to October contracts, a measure of summer supply expectations, widened 1.4 cents to 8.8 cents. The discount of October to January contracts widened 1.5 cents to 32.3 cents.
Natural gas has slumped 11% since touching a 21-month high of $4.444 per million Btu on May 1 after the peak heating-demand season, extended by the coldest April since 1997, drew to a close. Prices had surged into early spring as a supply deficit to the five-year average hovered near a record low.
The stockpile increase last week was larger than the five-year average gain for the week of 83 billion cubic feet, department data show. A deficit to the five-year average narrowed to 4.1% from 5% the previous week. Supplies were 26.1% below year-earlier inventories, compared with 28.3% in last week’s report.
Commodity Weather Group LLC predicted that above-normal temperatures in central and eastern states over the next five days will give way to a cool front from May 21 through May 25. The heat may return to the central U.S. at the end of the month, the Bethesda, Maryland-based forecaster said.
The high in New York on May 27 may be 66 degrees Fahrenheit (19 Celsius), 8 lower than the usual reading, and Dallas may drop to 2 below normal at 85 degrees, according to AccuWeather Inc. in State College, Pennsylvania.
“The real change this week is those weather maps turned decidedly warmer for the balance of May and most importantly we are seeing that heat begin to move into Texas,” Viswanath said. Texas and the Southeast states account for nearly half of U.S. summer electric power demand, she said.
Gas consumption typically slumps after the peak heating season and before hot weather drives demand for electricity to run air conditioners. About 50% of U.S. households use gas for heating, according to the EIA, the statistical arm of the Energy Department. Power generation accounts for 33% of gas consumption.
Gross gas production in the lower-48 states climbed 1.3% to 73.22 billion cubic feet a day in February from a revised 72.3 billion in January, the monthly EIA-914 report on April 30 showed. New wells brought online at shale deposits such as the Marcellus in the Northeast and the Bakken in North Dakota contributed to the biggest percentage gain since October 2011 and the first increase in three months.
The EIA estimates that U.S. marketed production in 2013 will set a record for the sixth straight year, climbing 1% to 69.9 billion cubic feet a day, according to the May 7 Short-Term Energy Outlook. Consumption will increase to 70.17 billion cubic feet a day from 69.68 billion.
The boom in oil and natural gas production helped the U.S. cut its reliance on imported fuel. The U.S. produced 84% of its own energy in 2012, the most since 1991, EIA data show. The measure of self-sufficiency rose to 88% in December, the highest since February 1987.