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Natural-Gas Futures Fall on Mild Weather, Lack of Gulf Storm Disruptions
Natural gas futures fell for the third time in four days in New York as forecasts showed milder weather in the U.S. Northeast and Midwest, limiting demand for the power-plant fuel.
Temperatures will be in a normal range through Sept. 16 after being above normal last week, according to Commodity Weather Group in Bethesda, Maryland. Tropical Storm Hermine weakened as it advanced into South Texas, the U.S. National Hurricane Center said at 10 a.m. local time, posing little risk to gas production in the Gulf of Mexico.
“You are not going to see warmer-than-normal weather this week,” said Cameron Horwitz, an analyst in Houston at SunTrust Robinson Humphrey Inc., a unit of Georgia’s biggest bank. No tropical storm “is going to be ominous and that’s not going to be supportive” for gas prices.
Natural gas for October delivery fell 8.7 cents, or 2.2 percent, to settle at $3.852 per million British thermal units on the New York Mercantile Exchange. The futures have declined 31 percent this year.
Mild weather will make it “increasingly difficult to achieve significant cooling demand in areas like the Midwest and East in the extended period,” Commodity Weather Group said.
About 23 percent of U.S. electricity is generated using natural gas, according to the Energy Department.
New York will have a high of 71 degrees Fahrenheit (22 Celsius) on Sept. 9, 6 degrees below normal, according to AccuWeather.com in State College, Pennsylvania. The city reached a high of 96 degrees on Sept. 1, 17 degrees above normal.
Further Weakening
Hermine, about 60 miles (95 kilometers) northwest of Corpus Christi, is moving toward the north at 17 miles per hour and may “become a tropical depression later,” the hurricane center said.
Tropical Storm Gaston in the northern Leeward Islands has a 10 percent chance of re-forming into a tropical cyclone over the next 48 hours, according to the center.
“The lack of market reaction to Tropical Storm Hermine just confirms that sentiment is bearish,” said Tim Evans, an energy analyst at Citi Futures Perspective in New York.
The National Oceanic and Atmospheric Administration last month reduced its 2010 Atlantic hurricane forecast to 14 to 20 named storms from an earlier estimate of 14 to 23.
About 10 percent of U.S. gas output will come from federal waters in the Gulf of Mexico this year, down from 17 percent five years ago, according to Energy Department estimates.
Supply Report
U.S. gas stockpiles increased by 54 billion cubic feet to 3.106 trillion in the week ended Aug. 27, the Energy Department reported last week. The five-year average gain is 62 billion. A surplus to the five-year average narrowed to 5.8 percent from 6.2 percent the previous week.
“The market is fundamentally undervalued,” said Evans. “Given where storage is, prices can easily be at a level like $4.50.”
U.S. gas inventories at the end of October will reach 3.752 trillion cubic feet, the Energy Department estimated in its monthly Short-Term Energy Outlook on Aug. 10. Stockpiles rose to a record 3.84 trillion in November 2009. The department is scheduled to release its September report tomorrow.
Wholesale natural gas at the benchmark Henry Hub in Erath, Louisiana, rose 7.99 cents, or 2.1 percent, to $3.8155 per million Btu on the Intercontinental Exchange.
Gas futures volume in electronic trading on the Nymex was 220,316 as of 2:36 p.m., compared with a three-month average of 257,000. Volume was 195,500 on Sept. 3. Open interest was 817,149 contracts, compared with the three-month average of 807,000. The exchange has a one-business-day delay in reporting open interest and full volume data.
To contact the reporters on this story: Moming Zhou in New York at Mzhou29@bloomberg.net;
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