Bloomberg News

Natural Gas Falls Most in Five Weeks After Stockpile Increase

June 09, 2011

June 9 (Bloomberg) -- Natural gas futures fell the most in five weeks after a government report showed a bigger-than- expected increase in U.S. inventories.

Gas declined from the highest level in 10 months after the Energy Department said gas stockpiles gained 80 billion cubic feet in the week ended June 3 to 2.187 trillion cubic feet. Analyst estimates compiled by Bloomberg showed an expected increase of 78 billion. A separate survey of Bloomberg users showed an increase of 76 billion.

“The number was a little bigger than what people were looking for,” said Brad Florer, a trader at Kottke Associates LLC, an energy trading firm in Louisville, Kentucky. “We are kind of at the top of the range, and if you are a bear, you are figuring that this is a good place to see if we are a bit overdone.”

Natural gas for July delivery fell 17.3 cents, or 3.6 percent, to settle at $4.674 per million British thermal units on the New York Mercantile Exchange, the biggest percentage loss since May 5. Gas traded at $4.945 before the storage report was released at 10:30 a.m. in Washington.

Prices had advanced to $4.983, the highest intraday price since Aug. 2, as forecasts showed hotter-than-normal weather.

Storage levels last week were 2.6 percent below the five- year average, wider than a deficit of 2 percent the previous week, today’s report showed. Inventories were down 10.4 percent from a year earlier compared with 10 percent in last week’s report.

The five-year average storage change for the week is an increase of 96 billion cubic feet, department data showed.

Demand Drop

“A larger than expected drop in demand over the Memorial Day weekend or rising nuclear plant operating rates may have played a role in the latest data,” Tim Evans, an energy analyst at Citi Futures Perspective in New York, said in an e-mailed comment. Memorial Day fell on May 30.

U.S. nuclear-power production rose 1.1 percent to the highest level in more than three months as reactors in Ohio, South Carolina, Minnesota and California increased output, the Nuclear Regulatory Commission reported.

Power generation increased 982 megawatts from yesterday to 87,970 megawatts, or 87 percent of capacity, according to the NRC report today and data compiled by Bloomberg. It was the most since March 6.

Power plants use about 30 percent of the nation’s gas supplies, according to the Energy Department.

The weather will be hotter than normal across the U.S. East, Midwest and South through June 13, according to Commodity Weather Group LLC in Bethesda, Maryland.

Hot Weather

The high temperature today in New York’s Central Park may reach 99 degrees Fahrenheit (37 Celsius), topping a record of 97 set in 1933, said Tim Morrin, a National Weather Service meteorologist in Upton, New York.

The weather will return to normal next week in the East, with highs in the upper 70s in New York, according to MDA EarthSat Weather in Gaithersburg, Maryland.

Exxon Mobil Corp., the largest U.S. natural-gas producer, paid $1.69 billion for two closely held energy explorers to gain shale-gas reserves in Pennsylvania and neighboring states.

Exxon completed the purchases of Phillips Resources Inc., based in Warrendale, Pennsylvania, and TWP Inc. of Butler, Pennsylvania, on June 2, Alan Jeffers, the Irving, Texas-based spokesman at Exxon, said in a phone interview yesterday.

German utilities need to build as much as 20 gigawatts of fossil-fuel-fired power plants over the next 10 years as the country exits from nuclear power, Chancellor Angela Merkel said today.

Gas futures volume in electronic trading on the Nymex was 481,123 as of 2:35 p.m., compared with the three-month average of 316,000. Volume was 379,810 yesterday. Open interest was 1,001,995 contracts. The three-month average open interest is 941,000.

The exchange has a one-business-day delay in reporting open interest and full volume data.

--With assistance from Brian Sullivan in Boston and Joe Carroll in Chicago. Editors: Bill Banker, Charlotte Porter

To contact the reporter on this story: Moming Zhou in New York at Mzhou29@bloomberg.net;

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net


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