Bloomberg News

Natural Gas Falls to Two-Week Low on Milder Weather Forecasts

June 14, 2011

June 14 (Bloomberg) -- Natural gas futures fell to a two- week low on speculation that below-normal temperatures in the U.S. Northeast will reduce demand for the power-plant fuel.

Gas dropped for a second day as companies including MDA EarthSat Weather in Gaithersburg, Maryland, said the weather will be cooler than normal in the Northeast through June 18. Gas has gained 12 percent since May 19 as temperatures broke records in cities including Baltimore.

“We’ve had quite a rally since late May and gas is pulling back a little bit,” said Carl Neill, an energy consultant at Risk Management Inc. in Atlanta. “The weather seems to be not as hot as it has been.”

Natural gas for July delivery fell 6.5 cents, or 1.4 percent, to $4.581 per million British thermal units on the New York Mercantile Exchange, the lowest settlement price since May 27. Gas is down 8.5 percent from a year ago.

The weather will stay “benign” this week in the Midwest and East, Matt Rogers, a forecaster with Commodity Weather Group LLC in Bethesda, Maryland, said in a note to clients.

New York will have a normal high temperature of 79 degrees Fahrenheit (26 Celsius) tomorrow, according to AccuWeather Inc. in State College, Pennsylvania. The city had a high of 95 degrees on June 9, 17 degrees above normal.

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

Milder Weather

“The market lost recent support as temperatures have moved lower from last week’s record highs to more normal levels,” James R. Crandell, an analyst with Barclays Capital in New York, said in a note to clients today.

Sales at U.S. retailers fell 0.2 percent in May, Commerce Department figures showed today in Washington. The median forecast of economists surveyed by Bloomberg News was a drop of 0.5 percent.

Marketed gas production will average 64.61 billion cubic feet a day in 2011, up from 61.83 billion produced in 2010, the Energy Department said June 7 in its monthly Short-Term Energy Outlook.

Gas drilling rigs in the U.S. fell 8 last week to 879, according to Houston-based Baker Hughes Inc.

“Natural gas production levels continue to keep the market in check, and in this respect, a steady rig count just below 900 should continue to grow production and loosen the balance between supply and demand,” Crandell said.

Supply Report

The Energy Department may say June 16 that gas inventories rose 69 billion cubic feet last week, according to the median of seven analyst estimates compiled by Bloomberg. The five-year average change for the week is an increase of 87 billion.

Stockpiles gained 80 billion cubic feet in the week ended June 3 to 2.187 trillion cubic feet, the department reported last week.

Gas futures volume in electronic trading on the Nymex was 204,554 as of 2:41 p.m., compared with the three-month average of 321,000. Volume was a 355,354 yesterday. Open interest was 1,009,000 contracts, rising to a record for a second straight day. The three-month average open interest is 944,000.

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

--Editors: Bill Banker, Charlotte Porter

To contact the reporters 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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