Sept. 30 (Bloomberg) -- Natural gas futures fell, heading for the second quarterly drop in the past three quarters, after a government report showed that U.S. inventories increased more than forecast last week. Gas stockpiles rose 74 billion cubic feet in the week ended Sept. 24 to 3.414 trillion, the Energy Department said today. Analyst estimates compiled by Bloomberg indicated a gain of 68 billion. A separate survey of Bloomberg users predicted an increase of 66 billion. “We are swimming in gas right now, and with the lack of usage for cooling and heating there is just not a whole lot of demand,” said Carl Neill, an energy consultant at Risk Management Inc. in Atlanta. “The question now is how full we get the storage ahead of the winter.” Natural gas for November delivery fell 14.9 cents, or 3.8 percent, to $3.813 per million British thermal units at 10:58 a.m. on the New York Mercantile Exchange. Gas traded at $3.883 before the report was released at 10:30 a.m. in Washington. The futures have declined 17 percent this quarter. Last week’s storage increase was bigger than the five-year average gain of 67 billion cubic feet. A surplus to the five- year average rose to 6.3 percent from 6.2 percent the previous week. A deficit to year-earlier supplies narrowed to 4.6 percent from 5 percent. Inventories will peak at 3.687 trillion cubic feet before cold-weather demand prompts utilities to pull gas from storage, the department predicted in its monthly Short-Term Energy Outlook on Sept. 8. Stockpiles rose to a record 3.837 trillion cubic feet last November. Production Report U.S. natural gas production fell 1.2 percent in July as output in the Gulf of Mexico and Alaska declined, the Energy Department reported yesterday. Gas output dropped to 71.02 billion cubic feet a day from a revised 71.88 billion in June, the lowest level since September, 2009, the department’s Energy Information Administration said in a monthly report known as EIA-914. Production in federal offshore tracts in the Gulf of Mexico dropped 2 percent to 5.87 billion cubic feet a day because of maintenance and tropical storms, the government said in the report. Output in the lower 48 states rose 0.3 percent to 64.38 billion cubic feet a day. The EIA-914 report covers gas gross withdrawals, which include gas used for repressuring, quantities vented and flared, and non-hydrocarbon gas removed in treating or processing operations. --Editors: Bill Banker, Joe Link To contact the reporters on this story: Moming Zhou in New York at Mzhou29@bloomberg.net; To contact the reporters on this story: To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net

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