BLBG: Natural Gas Falls to 2-Year Low on Slumping U.S. Fuel Demand
Natural gas futures in New York fell to the lowest in more than two years on signs of further slowing of consumption by factories and power plants as the recession deepens.
Gas tumbled today after a Commerce Department report showed that sales at retailers last month fell more than twice as much as forecast. Industrial demand, which accounted for 29 percent of U.S. gas usage, is weakening as petrochemical and steel companies cut output.
“People are extremely concerned about the drop-off in demand,” said Tom Orr, research director at Weeden & Co. in Greenwich, Connecticut. “We were anticipating a 3 percent decline in gas use in 2009. Industrial demand looks like it has fallen off a cliff.”
Natural gas for February delivery fell 18 cents, or 3.5 percent, to $5.004 per million British thermal units at 10:24 a.m. on the New York Mercantile Exchange. The futures touched $4.997, the lowest price since Sept. 27, 2006. Gas fell 6.5 percent yesterday and has dropped 11 percent this month.
“The decline yesterday was particularly disturbing with the cold weather,” Orr said. “People are now taking out technical levels and we may go below $5.”
An Energy Department supply report, scheduled for release tomorrow, may show a decline in U.S. stockpiles of 105 billion cubic feet in the week ended Jan. 9, according to median of nine analyst estimates compiled by Bloomberg.
Stockpile Reports
Inventories stood at 2.83 trillion cubic feet in the week ended Jan. 2, the department said last week. The surplus to the five-year average expanded to 3.2 percent from 2 percent in the previous week’s report.
“Economic news continues to paint a picture of softness that should outlast the cold weather,” George Hopley, an analyst at Barclays Capital in New York, said in a note today.
Temperatures are forecast to be below normal in the eastern half of the U.S. from today through Jan. 20, according to forecaster MDA Federal Inc.’s EarthSat Energy Weather of Rockville, Maryland.
“Right now we’re a long way from fundamentals,” said Michael Rose, a director of trading at Angus Jackson Inc. in Fort Lauderdale, Florida.
Current prices provide an opportunity to those who need to hedge against the possibility of higher gas costs later in the year, Rose said.
