US GAS: Futures Fall On Moderating-Demand Outlook

By Matt Day 
   Of DOW JONES NEWSWIRES 
 

NEW YORK (Dow Jones)--Natural-gas futures on Tuesday ended lower for a second consecutive session as traders viewed a moderating-demand outlook for the fuel as an opportunity to cash out to profit from the market's recent gains.

Natural gas for June delivery settled 2.3 cents, or 0.5%, lower, at $4.670 a million British thermal units on the New York Mercantile Exchange.

Futures touched three-month highs early Monday, but traders were reluctant to bet on further gains during spring's low-demand period, and the benchmark contract fell slightly on the day. With forecasters Tuesday calling for mostly mild weather in the coming weeks that should limit demand, traders continued to cash out.

Natural-gas use typically declines in the spring as mild weather leaves less need to cool or heat homes and businesses.

Futures had found support last week from outages at nuclear-power plants and some early-season air-conditioning demand. A larger-than-normal amount of nuclear-power stations were shut for maintenance in April, increasing the need for natural gas-fired electricity to pick up the slack. As a result, recent weekly builds in U.S. natural-gas inventories came in below market expectations and traders scrambled to adjust their positions to account for the shift in the supply picture.

Some of those idled nuclear plants should return to service beginning this week, analysts said, taking a toll on natural-gas demand expectations.

On the supply side, North American production is widely expected to continue at a high rate. Despite lost production due to equipment failures and maintenance in February, output in the lower 48 U.S. states on the month was still 3.3% above 2010 levels, the Energy Information Administration said Friday in a monthly report.

Meanwhile, open interest in natural-gas futures hit a record high of 992,434 contracts Monday, said CME Group Inc. (CME), operator of the Nymex, surpassing the previous record of 983,802 reached April 18. Average open interest so far this year is 903,646.

"I think people are taking a harder look at natural gas," said Jay Levine, president of brokerage Enerjay LLC in Portland, Maine.

The recent rise in natural-gas futures "is certainly one more sign that [the market] is probably not the bear that many people have felt it is."

 
   FUTURES           SETTLEMENT       NET CHANGE 
   Nymex June        $4.670           -2.3c 
   Nymex July        $4.738           -2.5c 
   Nymex Aug         $4.783           -2.4c 
 
   CASH HUB          RANGE            PREVIOUS DAY 
   Henry Hub         $4.58-$4.65      $4.57-$4.65 
   Transco 65        $4.56-$4.67      $4.55-$4.63 
   Tex East M3       $4.91-$5.05      $4.80-$4.95 
   Transco Z6        $4.90-$5.07      $4.82-$4.93 
   SoCal             $4.64-$4.70      $4.54-$4.68 
   El Paso Perm      $4.48-$4.54      $4.39-$4.48 
   El Paso SJ        $4.40-$4.50      $4.38-$4.46 
   Waha              $4.50-$4.59      $4.47-$4.53 
   Katy              $4.55-$4.61      $4.50-$4.57 
(Source: http://online.wsj.com/article/BT-CO-20110503-715142.html)