Bloomberg News

Natural Gas Falls for Fourth Day on Cooler Weather in Midwest

September 23, 2011

Sept. 23 (Bloomberg) -- Natural gas futures fell for a fourth day to the lowest level in almost 11 months as forecasts showed cooler weather in the U.S. Midwest, reducing demand for the power-plant fuel.

Gas fell 0.1 percent as forecasters including Commodity Weather Group LLC in Bethesda, Maryland, said temperatures will be below normal in the Midwest through Sept. 27. Prices may decline next week on sufficient stockpiles, seven of 13 analyst surveyed by Bloomberg said.

“We are in the shoulder season and you aren’t seeing much cooling or heating demand,” said James Williams, an economist at WTRG Economics, an energy research firm in London, Arkansas.

Natural gas for October delivery slid 0.4 cent to $3.701 per million British thermal units on the New York Mercantile Exchange, the lowest settlement price since Oct. 27. Gas fell 2.8 percent this week, the fifth weekly decline in six. Prices have dropped 16 percent this year.

November $3.85 calls, bets that prices will rise, were the most active options in electronic trading. The calls slid 0.3 cent to 0.6 cent per million Btu on volume of 200 lots.

The price difference, or spread, between futures for delivery in October 2011 and January 2012 narrowed 2 cents to 45.8 cents. The contracts represent the difference in price between gas for delivery in the fall, when mild weather reduces fuel use, and the winter, when demand is highest.

Mild Weather

The weather pattern is “fairly benign” for the U.S. and Southern Canada with a pattern that generally results in reduced cooling demand, according to Matt Rogers, president of Commodity Weather Group.

The eastern U.S. will see normal temperatures from Sept. 28 to Oct. 2, he said in a note to clients.

New York will have a high of 72 degrees Fahrenheit (22 Celsius) on Sept. 28, 2 degrees above normal, according to AccuWeather Inc. in State College, Pennsylvania. Chicago will have a high of 75 degrees.

Texas will see hotter-than-normal weather in the weekend, he said. Houston and Dallas may reach highs above 100 degrees.

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

Gas supplies rose 89 billion cubic feet to 3.201 trillion in the week ended Sept. 16, above the five-year average gain of 72 billion, an Energy Department report yesterday showed.

A shortfall to five-year average inventory levels narrowed to 1.1 percent from 1.6 percent the previous week, according to the report.

Production Report

Marketed gas production will average 65.79 billion cubic feet a day in 2011, up 6.4 percent from 61.83 billion last year, the Energy Department said in its monthly Short-Term Energy Outlook on Sept. 7.

The number of U.S. gas drilling rigs was unchanged this week at 912, according to Houston-based Baker Hughes Inc.

In the Atlantic, Tropical Storm Ophelia, the 15th named system of the season, was about 635 miles east-southeast of the Leeward Islands, according to the National Hurricane Center.

It is moving west at 16 mph with winds of 40 mph, just above the threshold of a tropical depression, according to a center advisory.

Natural gas futures volume in electronic trading on the Nymex was 214,580 as of 2:50 p.m. compared with the three-month average of 286,000. Volume was 412,185 yesterday. Open interest was 937,195 contracts compared with the three-month average of 978,000. The exchange has a one-business-day delay in reporting open interest and full volume data.

--With assistance from Christine Buurma in New York. Editors: Bill Banker, David Marino

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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