US GAS: Futures Down As Traders Focus On Mild Weather

Published: Jan 27, 2012

By Jerry A. DiColo
Of DOW JONES NEWSWIRES


NEW YORK (Dow Jones)--Natural gas futures fell Friday as milder temperatures and modest U.S. inventory declines are expected over the next several weeks.

Natural gas for February delivery fell 2.5 cents, or 1%, to recently trade at $2.580 a million British thermal units on the New York Mercantile Exchange. The February contract expires at settlement Friday, and the March contract was recently down 1.4 cents to $2.640/MMBtu.

Futures declined as investors looked past a larger-than-average withdrawal in U.S. gas stockpiles Thursday that many expect was an anomaly amid soaring production and low demand.

The Energy Information Administration's weekly inventory report on Thursday showed natural gas inventories during the week ended Jan. 20 fell 192 billion cubic feet.

The figure was above the 176-bcf average draw anticipated by analysts polled by Dow Jones Newswires. Still, inventories remain at their highest level ever for this time of year.

"Traders recognize that temperatures have been unseasonably mild recently, and they see this week's drawdown as a one-time bullish deal," said Peter Beutel, head of trading advisor Cameron Hanover, in a client note. "We are not likely to draw as much from inventories next week or in subsequent weeks."

Commodity Weather Group on Friday said it expects milder-than-normal temperatures across the U.S. for the next six to 10 days, which will likely keep a lid on gas-fired heating demand. The forecaster said that temperatures could turn lower along the east coast and south in its 11-to-15 day forecast.

Roughly half of all U.S. homes are heated with natural gas, and the milder-than-usual winter has squelched usage and sent prices sliding.

Meanwhile, natural gas for next-day delivery at the benchmark Henry Hub in Louisiana recently traded at $2.5950/MMBtu, according to IntercontinentalExchange, up from Thursday's average of $2.6814. Natural gas for next-day delivery at Transcontinental Zone 6 in New York traded at $3.7500/MMBtu, up from Thursday's average of $3.0051.

-By Jerry A. DiColo, Dow Jones Newswires; 212-416-2155; jerry.dicolo@dowjones.com