BS: Natural Gas Futures Drop on Speculation Supplies Will Be Ample
By Reg Curren
March 22 (Bloomberg) -- Natural gas futures fell to the lowest price in almost six months on concern mild weather will allow stockpiles to begin an annual period of increases earlier than normal this year, creating a supply glut later this year.
Above-normal temperatures will cover the Midwest and Northeast this week and be followed by a “major warm-up” starting April 1, according to MDA Federal Inc.’s EarthSat Energy Weather. Supplies usually drop from November through March as heating-fuel use peaks.
“If we start to build this week, and it’s pretty consistent, the thought in people’s mind will be” excess supplies, Michael Fitzpatrick, vice president of energy at MF Global in New York, said in an interview. “The economy is constrained and the idea of a recovery remains questionable.”
Natural gas for April delivery fell 7.2 cents, or 1.7 percent, to $4.097 per million British thermal units at 10:25 a.m. on the New York Mercantile Exchange. The contract reached $4.036, the lowest price since Sept. 28. Futures are down 26 percent this year.
U.S. supplies of gas are set to end the heating season higher than the five-year average. Stockpiles were 4.7 percent above the average in the week ended March 12, an Energy Department inventory report showed last week.
Inventories rose to a record 3.837 trillion cubic feet in November as increased output swamped a market where demand from factories, steel mills and chemicals plants was depressed by the worst recession since the 1930s. Gas futures dropped to a seven- year low of $2.409 per million Btu on Sept. 3 as supplies threatened to strain storage capacity.
Gas also fell along with crude as the dollar weakened and on speculation other governments will follow India in boosting interest rates.
“It’s easy to push gas down, especially with other commodities falling,” said Tom Orr, research director at Weeden & Co., a brokerage in Greenwich, Connecticut. “A sub-$4 price may be in the cards.”
--Editors: Bill Banker, David Marino
To contact the reporter on this story: Reg Curren in Calgary at rcurren@bloomberg.net
To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net
