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Sep 06, 2010
Natural Gas Falls to Lowest in a Week on Signs of Ample Supply Feb 08, 2010
By Reg Curren
Feb. 8 (Bloomberg) -- Natural gas futures fell to the lowest price in a week in New York on anticipation inventories of the heating fuel will be adequate to meet winter demand.
Stockpiles in the week ended Jan. 29 totaled 2.406 trillion cubic feet, a surplus of 6.6 percent compared with the five-year average, according to the Energy Department. Withdrawals from storage will start to slow this month as the peak of winter consumption passes.
“There’s some cold in front of us, but the absolute temperatures are not as intense as they were in the second week of January,” said Tim Evans, an energy analyst at Citigroup Global Markets Inc. in New York. “We’re trading March futures and spring is not that far off. Withdrawals are declining.”
Natural gas for March delivery fell 11.4 cents, or 2.1 percent, to settle at $5.401 per million British thermal units on the New York Mercantile Exchange, the lowest price since Jan. 29. The futures advanced 7.5 percent last week on forecasts for cold weather and heavy snow.
A stretch of cold weather in December and early January trimmed the surplus of natural gas. Utilities and other large consumers of gas withdrew a combined 511 billion cubic feet from storage in the first two weeks of January, the biggest two-week draw since at least 1993.
With ample storage, an increase in gas rigs and economy concerns, prices over the next four to six weeks are probably locked in a range between $5 and $6 per million Btu, said Kyle Cooper, a managing director at energy consultant IAF Advisors in Houston.
Trading Range
“Gas seems pinned around $5.50,” he said. “If you’re trying to be bullish, it’s hard with the way the economy is looking, and if you’re bearish, it has gotten colder.”
Industrial users, including factories, chemical plants and steel mills, account for 29 percent of U.S. demand for gas. Their purchases of the fuel slid 9.3 percent through the first 11 months of 2009 as the worst recession since the 1930s closed factories.
Manufacturing demand has not rebounded with the recovery, leaving gas prices to fluctuate based on weather forecasts alone, said Laurent Key, a natural gas analyst with Societe Generale in New York.
“Industrial consumption is way too low compared with the recovery,” Key said. “It is lagging the recovery by too long.”
The number of natural-gas rigs last week gained 17, or 2 percent, to 878, the highest level since March 13, 2009.
To contact the reporter on this story: Reg Curren in Calgary at rcurren@bloomberg.net
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