natural gas options

natural gas futures

October 15th, 2013

Natural gas futures fluctuated in New York amid predictions for colder-than-normal weather that would spur heating-fuel consumption.

Gas moved between gains and losses as MDA Weather Services in Gaithersburg, Maryland, said temperatures may be below average in the central U.S. from Oct. 20 through Oct. 29. The low in Chicago on Oct. 24 may be 32 degrees Fahrenheit (0 Celsius), 11 less than usual, according to AccuWeather Inc. in State College, Pennsylvania.

“Even if we have a cold front, we’ll have plenty of supply,” said Phil Flynn, a senior market analyst at Price Futures Group in Chicago. “The market is a little bit overextended and traders have been overplaying the cold weather.”

Natural gas futures for November delivery rose 0.2 cent to $3.822 per million British thermal units at 9:36 a.m. on the New York Mercantile Exchange. Trading volume was 1 percent below the 100-day average. Prices have advanced 14 percent this year. The futures reached $3.855 per million Btu yesterday, the highest intraday price since June 21, and climbed to that level again today.

The discount of November to December futures was unchanged at 14.6 cents. November gas traded 23.6 cents below the January contract, compared with 23.9 cents yesterday.

November $4.20 calls were the most active options in electronic trading. They were 0.2 cent lower at 0.7 cent per million Btu on volume of 153 at 9:38 a.m. Calls accounted for 56 percent of trading volume. Implied volatility for November at-the-money options was 31.40 percent at 9:30 a.m., compared with 31.88 percent yesterday.

Natural Gas Futures: Goldman Recommendation

Goldman Sachs Group Inc. ended its recommendation to buy November $4.20 calls, said Samantha Dart, senior energy economist at the bank in London, in a note to clients today. The trade has lost about 30 cents since Goldman suggested it in April, the bank said in the report.

Year-on-year gas production growth was 1.3 billion cubic feet a day from April to August, compared with 0.4 billion a day in the first quarter, driven by rapid increases from the Marcellus shale formation in the U.S. Northeast, Dart said in the report. The supply gains contributed to lower-than-forecast gas prices, she said.

The low in St. Louis on Oct. 24 may be 35 degrees Fahrenheit, 8 below normal, AccuWeather data show. About 49 percent of U.S. households use gas for heating, according to the Energy Information Administration, the Energy Department’s statistical arm.

Natural Gas Futures: Heating Demand

The U.S. may have 1.3 percent more heating-degree days, a measure of weather-driven energy demand, from November to March compared with the same period last year, Commodity Weather Group said in a Sept. 23 seasonal outlook.

Gas inventories totaled 3.577 trillion cubic feet in the seven days ended Oct. 4, 1.6 percent above the five-year average and 3.7 percent below last year’s supplies for the period, Energy Information Administration data show.

The EIA ceased operations on Oct. 11 and will remain closed for the duration of the government shutdown. Data releases, including the weekly gas inventory report, will not be published.

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, EIA data show.

- Christine Buurma in New York at Bloomberg.