Natural gas futures fell the most in two months after a government report showed a bigger-than- estimated increase in U.S. stockpiles. Supplies in storage gained 66 billion cubic feet in the week ended July 31 to 3.089 trillion cubic feet, the Energy Department said. Analysts forecast a gain of 61 billion. The total was a record for late July, based on weekly department data going back to 1994.

“We have a lot of supply and it really weighs on the market,” said Phil Flynn, vice
president of research at PFG Best in Chicago. “The dollar is also a little firmer, so with the bearish storage report, natural gas is having a tough time hanging on.”

Natural gas for September delivery fell 26.6 cents, or 6.6 percent, to $3.776 per million British thermal units at 11:15 a.m. on the New York Mercantile Exchange, the biggest one-day decline since June 3. The fuel was trading at $3.945 before the report was released at 10:30 a.m. in Washington. Gas has declined 33 percent this year.

A stronger dollar makes commodities less attractive to some investors, prompting them to sell holdings of natural gas, oil and metals.

Stockpiles were 19 percent higher than the five-year average last week. The average supply increase for the week over the past five years is 48 billion cubic feet, according to department data.

The shutting of a Gulf of Mexico pipeline by Enterprise Products Partners LP propelled prices higher yesterday, Flynn said. Gas had advanced 11 percent this week through yesterday. “Even with these outages, it’s just another reminder that we have a lot of supply,” he said. Stockpile Glut

A glut of gas in storage may persist longer than anticipated as some of the largest U.S. natural gas producers increase output.

XTO Energy Inc.