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Natural Gas Falls for Second Day as Milder Weather Signals Drop in Demand
Natural gas futures fell in New York, bringing the decline this month to 14 percent, as milder- weather forecasts in the eastern U.S. signaled weaker demand for the power-plant fuel.
Temperatures will be in a normal range in the eastern U.S. through Aug. 27, according to Commodity Weather Group in Bethesda, Maryland. U.S. gas inventories were 7.9 percent higher than five-year average in the week ended Aug. 6, according to the Energy Department. The department will report last week’s inventories tomorrow.
“We’re just kind of losing steam here in the gas market,” said Phil Flynn, an analyst with PFG Best in Chicago. “We’re seeing a cool front hitting New York, and it’s a reminder that summer is coming to an end.”
Natural gas for September delivery fell 2.8 cents, or 0.7 percent, to settle at $4.239 per million British thermal units on the New York Mercantile Exchange. Prices have dropped 24 percent this year.
Temperatures in New York will be mostly around the normal range in the second half of this month, according to AccuWeather.com in State College, Pennsylvania. Weather in the city was hotter than normal in the first half of August, according to AccuWeather.
New York will have a high of 77 degrees Fahrenheit (25 Celsius) on Aug. 27, 3 degrees below normal. Boston will have a high of 72 degrees, 6 degrees above normal.
About 23 percent of U.S. electricity is generated using natural gas, according to the Energy Department.
Gas Stockpiles
The Energy Department may say stockpiles increased by 30 billion cubic feet in the week ended Aug. 13, according to the median of 17 analyst estimates compiled by Bloomberg. The five- year average gain is 50 billion.
Gas supplies as of Aug. 6 stood at 2.985 trillion cubic feet.
A cluster of thunderstorms in the west-central Caribbean was unlikely to develop into a tropical cyclone, according to the National Hurricane Center.
The U.S. on Aug. 5 reduced its forecast for the 2010 Atlantic hurricane season to 14 to 20 named storms, down from 14 to 23, because of less activity than expected in the first two months of the season, which runs through November.
Hurricane Alex and Tropical Storm Bonnie this year reduced production by 8 billion cubic feet, less than the 20 billion the government had expected, the department said in its Short-Term Energy Outlook on Aug. 10.
“The supposedly heavy hurricane season doesn’t seem to be happening yet,” said James Williams, an economist at energy research firm WTRG Economics in London, Arkansas. “There is plenty of drilling activity and inventories are well above normal.”
Drilling Rigs
The number of U.S. gas rigs rose nine to 992 last week, the highest level since February 2009, according to a Baker Hughes Inc. report on Aug. 13.
Wholesale natural gas at the benchmark Henry Hub in Erath, Louisiana, rose 6.4 cents, or 1.5 percent, to $4.3479 per million Btu on the Intercontinental Exchange.
Gas futures volume in electronic trading on the Nymex was 169,983 as of 2:34 p.m., compared with a three-month average of 263,000. Volume was 243,349 yesterday. Open interest was 828,693 contracts, compared with the three-month average of 811,000. The exchange has a one-business-day delay in reporting open interest and full volume data.
To contact the reporters on this story: Christine Buurma in New York at cbuurma1@bloomberg.net
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