Natural gas fell to the lowest in more than two years in New York as demand for the industrial and heating fuel slumps in a deepening recession. Weak factory demand blunted storage withdrawals during frigid weather last week. A supply decline of 176 billion cubic feet reported by the U.S. Energy Department today was about 23 percent less that it would have been in a healthier economy, said Scott Speaker, JPMorgan Chase & Co.’s natural gas strategist. “The same number of degree days a year ago would have accounted for a draw somewhere in the neighborhood of 230 billion cubic feet,” Speaker said in a conference call today. “The situation we’re in is one of extreme weakness in the industrial sector.” Natural gas for February delivery fell 17.7 cents, or 3.8 percent, to $4.504 per million British thermal units at 11:11 a.m. on the New York Mercantile Exchange. Prices touched $4.44, the lowest since Sept. 27, 2006. Gas has dropped 20 percent this year and is down 67 percent from the 2008 high of $13.694 reached on July 2. Supplies fell to 2.56 trillion cubic feet in the week ended Jan. 16, 1.2 percent above the five-year average, the Energy Department said. Heating needs last week were 14 percent above normal for the entire U.S., as lower temperatures covered the Midwest and Northeast, David Salmon of Belton, Missouri-based Weather Derivatives, said in a note on Jan. 19. The slowing U.S. economy probably limited withdrawals from storage as industrial fuel usage declined, he said. Salmon expected storage to fall 162 billion cubic feet compared with as much as 237 billion in previous years when similar temperatures occurred. About half of U.S. homeowners rely on gas for heating.

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