Natural gas futures fell in New York, erasing earlier gains, on concern U.S. supplies of the power-plant and factory fuel are ample. An Energy Department report tomorrow may show that gas stockpiles gained 51 billion cubic feet in the week ended July 16, based on the median of 16 estimates in a Bloomberg survey of analysts. Inventories were 11 percent above the five-year average the previous week, according to department data. “The production base is still too high,” said Scott Hanold, an energy analyst at RBC Capital Markets in Minneapolis. “We are producing too much gas and demand is not strong enough.” Natural gas for August fell 7.7 cents, or 1.7 percent, to settle at $4.513 per million British thermal units on the New York Mercantile Exchange. The futures have declined 19 percent this year. The five-year average stockpile increase for last week is 64 billion cubic feet, department data showed. Gas stockpiles gained 78 billion cubic feet in the week ended July 9 to 2.84 trillion, the Energy Department said last week. A surplus to the five-year average narrowed to 10.7 percent from 11.5 percent the previous week. A deficit to year-earlier supplies widened to 1.1 percent from 0.8 percent the previous week. Stockpiles will reach 3.81 trillion cubic feet by the end of October, the Energy Department said in its Short-Term Energy Outlook report on July 7. Supplies rose to a record 3.837 trillion on Nov. 27. Prices rose in earlier trading on forecasts for hotter- than-normal weather. July Forecast Temperatures will be above normal from July 26 to July 30, according to the National Weather Service. “The hot weather should help limit storage injections,” said Cameron Horwitz, an analyst at SunTrust Robinson Humphrey Inc. in Houston. “Over the next few months, gas will take its cue from the weather.” New York will have a high of 96 degrees Fahrenheit (36 Celsius) on July 24, 11 degrees above average, according to AccuWeather Inc. Boston is forecast to reach 90. About 23 percent of electricity is generated using natural gas, Energy Department figures show. Cooling requirements in the U.S. will be 21 percent higher than normal from tomorrow through July 28, according to Weather Derivatives of Belton, Missouri. Caribbean Weather A system bringing heavy rain to the Dominican Republic, Haiti and Puerto Rico is less likely to strengthen into a depression or tropical storm, the National Hurricane Center said. The system has a 50 percent chance of developing into a stronger storm within two days, the center said in an advisory on its website at about 1:30 p.m., down from an estimated 70 percent probability earlier today. This hurricane season, estimated by the government to be the most active since 2005, may cut gas production in the Gulf of Mexico by 166 billion cubic feet through November, according to Energy Department estimates released on July 7. Wholesale natural gas at the benchmark Henry Hub in Erath, Louisiana, rose 10.93 cents, or 2.4 percent, to $4.6994 per million Btu on the Intercontinental Exchange. Gas futures volume in electronic trading on the Nymex was 247,048 as of 3:09 p.m., compared with a three-month average total of 251,000. Volume was 251,450 yesterday. Open interest was 785,515 contracts, compared with the three-month average of 829,000. The exchange has a one-business-day delay in reporting open interest and full volume data. To contact the reporters on this story: Moming Zhou in New York at Mzhou29@bloomberg.net;

Source