Natural Gas Futures Decline on Forecasts of Record Stockpiles
May 11, 2011, 7:25 PM EDTBy Christine Buurma
May 11 (Bloomberg) -- Natural gas futures dropped for the seventh time in eight days in New York on speculation that rising production will bring inventories to a record by the fall.
Gas slipped as much as 2.2 percent after the Energy Department said yesterday that stockpiles may climb to 3.9 trillion cubic feet by the end of October, surpassing the previous pre-winter record of 3.84 trillion.
“If we start to see storage injections that match last year’s levels, the market could test the three-week low below $4.15,” said Gene McGillian, a broker and analyst with Tradition Energy in Stamford, Connecticut. “We still don’t have significant gas demand for cooling.”
Natural gas for June delivery fell 5 cents, or 1.2 percent, to $4.196 per million British thermal units at 1:41 p.m. on the New York Mercantile Exchange. The futures have declined 4.7 percent this year.
Gas futures also dropped in sympathy with crude oil, which fell as much as 5.4 percent after an Energy Department report showed that U.S. crude supplies rose to the highest level in two years, said Pax Saunders, an analyst with Gelber & Associates in Houston, in a note to clients today.
“After a pop to $4.292 early this morning, natural gas futures have coupled with the crude contract,” Saunders said. “A glance at the 10-minute charts shows sympathy in the decline between the two commodities. Haven’t seen that in a while.”
Weather Outlook
Normal or cooler-than-normal temperatures are likely in the eastern half of the U.S. from May 16 through May 20, according to Commodity Weather Group LLC in Bethesda, Maryland. The mild weather may reduce air-conditioning use, crimping demand for gas as a power-plant fuel.
The high temperature in New York on May 18 may be 69 degrees Fahrenheit (21 Celsius), 3 below normal, according to AccuWeather Inc. in State College, Pennsylvania. The high in Atlanta may be 75 degrees, 5 below normal.
Cooling demand in the U.S. may be 64 percent below normal from May 17 through May 21, David Salmon, a meteorologist with Weather Derivatives in Belton, Missouri, said in a note to clients today.
Power plants use 30 percent of the nation’s gas supplies, according to the Energy Department.
U.S. natural-gas stockpiles probably rose less than the seasonal average last week as nuclear power-plant shutdowns increased demand for gas as a replacement fuel, according to analyst estimates compiled by Bloomberg.
Supply Report
Inventories rose 71 billion cubic feet to 1.828 trillion in the week ended May 6, according to the median of 20 estimates. The five-year average stockpile change for the week is an increase of 90 billion, according to Energy Department data. Supplies climbed 93 billion cubic feet a year earlier.
Stockpiles totaled 1.757 trillion in the week ended April 29, 1 percent below the five-year-average and 11.4 percent below last year’s level, the department reported last week.
Gas stockpiles may climb to a record 3.95 trillion cubic feet in 2011 and 3.98 trillion in 2012, Laurent Key, U.S. natural gas analyst for Societe Generale SA in New York, said during the company’s quarterly energy outlook conference call March 23.
Demonstrated peak working gas capacity was 4.049 trillion as of April 2010, according to the Energy Department. The measure is the sum of the highest inventory level in each storage facility over the previous five years, excluding supplies needed to maintain adequate pressure.
--Editors: Bill Banker, Richard Stubbe
To contact the reporter on this story: Christine Buurma in New York at cbuurma1@bloomberg.net;
To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net
