Natural Gas Futures Decline a Second Day as Forecasts Show Milder Weather

Natural gas futures declined for a second day as forecasts showed warmer-than-normal weather in the eastern U.S., reducing demand for the heating fuel.

Gas fell 1.6 percent as forecasters including Commodity Weather Group LLC in Bethesda,Maryland, said temperatures will be above normal in the East through the end of April. Scheduled gas deliveries to U.S. residential users dropped to the lowest level in more than five months, according to data compiled by Bloomberg.

“It’s the low-demand shoulder season,” said James Williams, an economist at WTRG Economics, an energy research firm in London, Arkansas. “You can’t establish a solid up trend at this time of the year.”

Natural gas for May delivery dropped 6.6 cents to settle at $4.138 per million British thermal units on the New York Mercantile Exchange. Gas rose 4 percent last week, the first gain in three weeks. The futures have declined 6.1 percent this year.

The high temperatures in New York will be 77 degrees Fahrenheit (25 Celsius) on April 26, 13 degrees above normal, according to AccuWeather Inc. in State College, Pennsylvania.Washington will have a high of 83 degrees, 13 above normal.

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

Gas Deliveries

Scheduled gas deliveries to residential users declined 2.7 percent to 26.5 million dekatherms (25.8 billion cubic feet) today, the lowest level since Oct. 26, according to data compiled by Bloomberg, based on a sampling of gas pipeline nominations.

Shipments have tumbled 53 percent since peaking at 56.4 million dekatherms on Feb. 9.

“We may still have more selling ahead,” said Carl Neill, an energy consultant at Risk Management Inc. in Atlanta. “The rig count is fairly high and production is also fairly high.”

The number of gas drilling rigs in the U.S. fell 4 to 885 last week, according to Houston-based Baker Hughes Inc.

Marketed gas production will average 63.32 billion cubic feet a day in 2011, up 2.4 percent from last year’s 61.83 billion, according to the Energy Department.

U.S. gas inventories increased 28 billion cubic feet in the week ended April 8 to 1.607 trillion cubic feet, the department reported last week.

Futures Market Positions

Net-long positions in gas held by managed money, including hedge funds, commodity pools and commodity-trading advisers, in futures and options combined in four natural-gas contracts fell by 32,883 futures equivalents, or 32 percent, to 71,163 in the week ended April 12, according to the Commodity Futures Trading Commission’s weekly Commitments of Traders report.

Short positions rose 25,508 futures equivalents, while long positions declined 7,375, according to the CFTC data.

Gas futures volume in electronic trading on the Nymex was 253,294 as of 2:39 p.m., compared with the three-month average of 324,000. Volume was 259,552 on April 15. Open interest was 979,320 contracts. The three-month average open interest is 911,000.

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

(Source: http://www.bloomberg.com/news/2011-04-18/natural-gas-futures-rise-in-new-york-on-increased-cooling-demand-in-south.html)