Natural Gas Futures Fall to Four-Week Low on Inventory Outlook

Natural gas dropped to a four-week low on speculation that a stockpile decline last week wasn’t enough to keep supplies from reaching a record by November.

Gas fell 3.9 percent after the Energy Department said inventories declined 174 billion cubic feet to 2.542 trillion. Analyst estimates compiled by Bloomberg showed a decrease of 170 billion. Stockpiles may surpass storage capacity of about 4.1 trillion cubic feet later this year, said Cameron Horwitz, an analyst with Canaccord Genuity in Houston.

“The supply-and-demand fundamentals remain really uninspiring for the gas market,” Horwitz said. “When the market stepped back and assessed the storage number, people saw it was just above expectations and nothing to get overly excited about.”

Natural gas for February delivery fell 17.5 cents to $4.316 per million British thermal units on the New York Mercantile Exchange, the lowest settlement price since Dec. 29. The futures are down 18 percent from a year ago.

February futures expired today. The more actively traded March contract declined 18.2 cents, or 4 percent, to $4.319 per million Btu.

“The bulls are throwing the towel,” said Carl Neill, an energy consultant at Risk Management Inc. in Atlanta. “The focus is just entirely on how much stockpiles we are going to have.”

Last week’s storage decrease was bigger than the five-year average withdrawal for the week of 152 billion cubic feet, department data show. A surplus to the five-year average narrowed to 1.2 percent from 1.9 percent the previous week. A surplus to year-earlier supplies slipped to 0.4 percent from 2.8 percent.

Pre-Report Estimates

Analyst forecasts compiled by Bloomberg before the report was released ranged between decreases of 158 billion and 195 billion cubic feet.

The number of rigs drilling for gas in the U.S. reached the highest level in five months last week, according to data published Jan. 21 by Houston-based oil field services company Baker Hughes Inc. Gas rigs rose by four to 906.

This week’s rig report will be released tomorrow.

A total of 36 inches (82 centimeters) of snow has fallen in New York City’s Central Park so far this month, beating the old January record of 27.4 inches set in 1925, the National Weather Service said.

The record for snowiest month in New York City history is 36.9 inches, set in February 2010, according to agency data.

New York Snow

As much as 1.5 inches may fall tomorrow and the following day as new storms move in from the Midwest, said private forecaster AccuWeather Inc. in State College, Pennsylvania.

Forecasts showed moderating temperatures in the eastern and central U.S. in mid-February that may reduce demand for the heating fuel.

The low in New York on Feb. 8 may be 30 degrees Fahrenheit (minus 1 Celsius), 3 degrees above normal, according to AccuWeather. The low in Washington may be 33 degrees, 5 degrees above normal.

About 52 percent of U.S. households use natural gas for heating, according to the Energy Department.

Applications for jobless benefits increased by 51,000 to 454,000 in the week ended Jan. 22, Labor Department figures showed today. Economists forecast 405,000 claims. Some gas traders track economic data for signs of acceleration in the economic recovery that would boost fuel demand.

Gas futures volume in electronic trading on the Nymex was 235,930 as of 2:40 p.m., compared with the three-month average of 292,000. Volume was 305,093 yesterday. Open interest was 829,971 contracts. The three-month average open interest is 791,000. The exchange has a one-business-day delay in reporting open interest and full volume data.

To contact the reporter on this story: Christine Buurma in New York at cbuurma1@bloomberg.net; Moming Zhou in New York at Mzhou29@bloomberg.net.

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.