May 24 (Bloomberg) -- Natural gas futures fell, heading for their first monthly decline since February, on speculation that demand from power plants won’t be strong enough to surpass rising supplies of the fuel.
Gas dropped for the first time in three days as the Energy Department forecasts record gas production in 2011. Output may rise 2.3 percent to 63.2 billion cubic feet a day this year, the department’s May 10 Short-Term Energy Outlook showed. Prices had risen as a drop in the number of active drilling rigs spurred speculation that production would decline.
“We’ve had a move down in gas rigs, but generally speaking we’re well above the 800 to 825 number where you’d actually see an impact to natural gas production,” said Carl Neill, an energy consultant at Risk Management Inc. in Atlanta. “The expectation is that we’ll have plenty of gas in storage at the end of the summer.
Natural gas for June delivery fell 0.1 cent to settle at $4.345 per million British thermal units on the New York Mercantile Exchange. The futures have declined 7.5 percent this month.
“Near-term demand growth aside, robust gas supply should remain a headwind for gas prices,” analysts including Cameron Horwitz at Canaccord Genuity in Houston said in a note to clients today.
Gas rigs fell by 8 to 866 last week, the lowest level since the week ended Jan. 29, 2010, according to data from Houston- based Baker Hughes Inc.
Stockpile Report
The Energy Department may report May 26 that 93 billion cubic feet of gas were added to inventories in the week ended May 20, according to the median of six analyst estimates compiled by Bloomberg. The five-year average injection is 95 billion cubic feet.
Last year, stockpiles grew by 100 billion cubic feet for the week, department data show. Inventories totaled 1.919 trillion in the week ended May 13, 1.8 percent below the five- year average and 11 percent below year-earlier levels.
Inventories may rise near 3.9 trillion cubic feet at the end of October because of higher production and a mild summer relative to last year, the department said. Stockpiles totaled a record 3.84 trillion in November 2010, according to data compiled by Bloomberg.
Gas Capacity
Demonstrated peak working gas capacity was 4.049 trillion as of April 2010, according to the department. The measure is the sum of the highest inventory level in each storage facility over the previous five years, excluding supplies needed to maintain adequate pressure.
Last week, the National Oceanic and Atmospheric Administration predicted that 12 to 18 named storms, with winds of 39 miles per hour (63 kilometers per hour) or higher, would form during the six-month Atlantic season. Of those storms, six to 10 may become hurricanes with winds of at least 74 mph.
The average Atlantic hurricane season produces 11 named storms, according to the hurricane center.
Gas futures volume in electronic trading on the Nymex was 232,293 as of 2:44 p.m., compared with the three-month average of 308,000. Volume was 302,925 yesterday. Open interest was 927,174 contracts. The three-month average open interest is 944,000.