BLBG: Natural Gas Falls Amid Ample Supplies and Declining Demand
Natural gas fell before a government report today that may show supplies of the heating and industrial fuel are higher than a year ago, suggesting ample supplies to meet cold-weather demand.
A survey of 15 analysts compiled by Bloomberg showed an expected stockpile decline of 140 billion cubic feet in the week ended Dec. 19. A drop that size would put inventories at 3.027 trillion cubic feet, up from 3.008 trillion a year earlier. Supplies normally decline during the cold weather months, when demand is highest.
“The people in the trading ring today are waiting on the storage report and if there’s anything exciting they’ll react then,” said Peter Beutel, president of Cameron Hanover Inc., an energy consulting company in New Canaan, Connecticut. “There’s also just a lot of exhaustion having gone through a record bull market and bear market within a year.”
Natural gas for January delivery fell 18.1 cents, or 3.2 percent, to $5.556 per million British thermal units at 10:59 a.m. on the New York Mercantile Exchange. Gas futures have dropped 26 percent this year. The January contract expires Dec. 29.
The Energy Department is scheduled to issue the weekly supply report at noon New York time today.
“While as much as 140 billion cubic feet may be drawn from stockpiles, it shouldn’t have more than a temporary” effect on price, Michael Fitzpatrick, vice president for energy risk management at MF Global Ltd. in New York, said in a note today. “It will take weeks of arctic air to whittle down high storage levels.”
Milder weather is expected in the Midwest and Northeast today through Dec. 29, according to forecaster MDA Federal Inc.’s EarthSat Energy Weather of Rockville, Maryland.
Higher temperatures in the Midwest, where 72 percent of households rely on gas for heating, will limit withdrawals from storage, helping to keep supplies above normal.
“Weather may be having a small impact,” Beutel said. “For the most part, everything that traders needed to do was done yesterday and Monday.”
A recession in the U.S. has cut demand from industrial users of the fuel, keeping supplies at above-average amounts for this time of year. Usage may slow more over the next two weeks as the Christmas and New Year’s holidays prompt plant closures in the U.S. and Canada.
To contact the reporter on this story: Reg Curren in Calgary at rcurren@bloomberg.net.
