Bloomberg ArticleCheers,
Natural Gas Futures Tumble as Mild Weather Depresses Demand
Nov. 18 (Bloomberg) -- Natural gas tumbled more than 5percent, the biggest drop this month, as mild weather trimmeddemand for the heating and power-plant fuel.
Above-normal temperatures will cover the U.S. Northeast andMidwest into next week, according to the Commodity Weather Groupin Bethesda, Maryland. About 52 percent of U.S. households relyon gas for heating. Inventories rose to a record 3.813 trillioncubic feet in the week ended Nov. 6.
“People had banked on getting to that 3.8 level and thencoming off from there,” said Cameron Horwitz, an analyst atSunTrust Robinson Humphrey Inc. in Houston. “It looks like it’sjust going to keep going higher for at least the next two orthree weeks.”
Natural gas for December delivery fell 24.5 cents, or 5.4percent, to $4.285 per million British thermal units at 12:12p.m. on the New York Mercantile Exchange, the biggest one-daydrop for a contract closest to expiration since Oct. 28. Gasfutures have declined 24 percent this year.
The futures touched $4.264, a new low for the Decembercontract, which began trading on Nov. 26, 2003.
Horwitz estimates that another 40 billion cubic feet ofnatural gas may be put into storage between now and the end ofNovember instead of a typical decline of 70 billion in thatperiod.
The Energy Department’s weekly gas storage report tomorrowmay show an increase of 19 billion cubic feet, based on themedian of nine analyst estimates compiled by Bloomberg. Thefive-year average gain for the week is 10 billion cubic feet,according to department data.
Storage Capacity
Prices are being pressed lower “with unseasonable warmthin the high-consumption regions and storage near capacity,”Michael Fitzpatrick, vice president of energy with MF Global inNew York, said in a note to clients. He forecast thatinventories gained 18 billion cubic feet last week.
Storage sites are now at 98 percent of peak capacity, whichthe Energy Department estimates at about 3.9 trillion cubicfeet.
Wholesale prices for natural gas have had wide swings asstorage fields and pipelines fill up, Horwitz said.
Gas for next-day delivery at the Henry Hub in Erath,Louisiana, the benchmark for New York futures, rose to $3.48 permillion Btu yesterday, bringing its gain to 43 percent thisweek, according to data compiled by Bloomberg.
The hub price fell 38 percent last week.
Futures may dip below $4 as the price threatens to plungethrough recent lows, said Stephen Briggs, a partner atIntermarket Management LLC in Verona, New Jersey, a brokerageand energy risk-management firm.
“There’s just no reason for gas to be high and once youget above $5, no one is into that at this stage,” said Briggs.“I don’t see the forecast getting much colder for awhile. We’regoing to need sub-zero temperatures for a couple of weeks beforesentiment starts turning around.”