Natural Gas Futures Fall for Second Day in New York on Inventory Outlook

Natural gas futures fell for a second day on forecasts that a government report tomorrow will show a smaller-than-average decline in U.S. stockpiles.

Gas dropped 1.4 percent as the Energy Department may say that inventories dipped 87 billion cubic feet in the week ended Feb. 25, according to the median of 20 analyst estimates compiled by Bloomberg. The five-year average drop for the week is 131 billion.

“The path of least resistance continues to be down and the bears remain in control,” said Brad Florer, a trader at Kottke Associates Inc., an energy trading firm in Louisville, Kentucky. “Unless the storage numbers come out in an extremely bullish fashion, they are not going to have much of an impact on the upside.”

Natural gas for April delivery fell 5.5 cents to settle at $3.818 per million British thermal on theNew York Mercantile Exchange. The futures have lost 13 percent this year.

Gas inventories dropped 81 billion cubic feet in the week ended Feb. 18 to 1.83 trillion cubic feet, the Energy Department’s report last week showed. That’s the smallest withdrawal since the week ended Nov. 26.

A deficit to five-year average supplies for the week narrowed to 3.2 percent from 6.3 percent the previous week, department data showed.

U.S. gas production advanced 1.1 percent in December from November, according to the department’s monthly EIA-914 report. Output in the lower 48 states increased for a second month, advancing 0.2 percent to 66.76 billion cubic feet a day from a revised 66.6 billion.

Supply Outlook

Gas inventories may total 1.651 trillion cubic feet by the end of March, down from 1.662 trillion a year earlier, the Energy Department estimated on Feb. 8 in its monthly Short-Term Energy Outlook.

“Gas production continues to grow and we are going to have pretty high inventory levels,” saidKyle Cooper, director of research for IAF Advisors in Houston. “The weather is warming up as winter is coming to an end.”

Temperatures may be normal or above-normal in the eastern and southern U.S. from March 7 through March 11, according to Commodity Weather Group in Bethesda, Maryland. About 52 percent of U.S. households use natural gas for heating, according to the Energy Department.

The low in New York on March 9 may be 42 degrees Fahrenheit (6 Celsius), 9 degrees above normal, according to AccuWeather Inc. in State College, Pennsylvania. The low in Washingtonmay be 45 degrees, 10 above normal.

About 52 percent of U.S. households use natural gas for heating, according to the Energy Department.

Gas futures volume in electronic trading on the Nymex was 224,389 as of 3:12 p.m., compared with the three-month average of 306,000. Volume was 294,295 yesterday. Open interest was 982,208 contracts. The three-month average open interest is 838,000.

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

(Source: http://www.bloomberg.com/news/2011-03-02/natural-gas-futures-fall-for-second-day-on-inventory-outlook.html)