Natural Gas Futures Slip for Second Day on Mild Weather Outlook

Natural gas futures declined for a second day in New York on forecasts of moderating temperatures that may reduce demand for the power-plant and heating fuel.

Gas futures dropped as much as 0.8 percent as forecasters including WSI Corp. predicted normal temperatures in the Northeast through May 12. WSI, based in Andover, Massachusetts, also sees normal weather in the upper Midwest.

“It’s spring, and gas demand is low,” said James Williams, an economist at WTRG Economics, an energy research firm in London, Arkansas. “There’s a lot of uncertainty in the market at this time of year.” Gas futures may drop near $4.50 per million British thermal units if the recent rally fails to hold, Williams said.

Natural gas for June delivery fell 2.3 cents, or 0.5 percent, to settle at $4.67 per million Btu on the New York Mercantile Exchange. Gas has risen 6 percent this year.

The high temperature in New York on May 7 may be 69 degrees Fahrenheit (21 Celsius), 1 degree above normal, according to AccuWeather Inc. in State College, Pennsylvania. The high in Chicago may be 68 degrees, matching the normal temperature.

Power plants use 30 percent of the nation’s gas supplies, according to the Energy Department.

U.S. nuclear-power production rose from the lowest level in almost 12 years as Dominion Resources Inc. started the Millstone 2 reactor in Connecticut, a Nuclear Regulatory Commission report today showed.

Nuclear Plants

Power generation nationwide increased 278 megawatts, or 0.4 percent, from yesterday to 68,945 megawatts, or 68 percent of capacity, according to the NRC report and data compiled by Bloomberg.

Thirty of the nation’s 104 reactors were offline, including the three at the Browns Ferry plant in Alabama that were knocked out after tornadoes destroyed regional transmission lines on April 27. Those reactors, located near the Tennessee line, were undamaged and are expected to power up this week.

The nuclear plant shutdowns, coupled with weak seasonal demand, “could pressure the market back to the $4.10-$4.25 area over the next few weeks,” said Tim Evans, an energy analyst with Citi Futures Perspective in New York, in a note to clients today.

Chesapeake Energy Corp. (CHK), the most active U.S. natural-gas driller, reported a first-quarter loss yesterday after losing money on energy hedging contracts.

Stockpile Estimates

U.S. natural-gas supplies probably rose less than the seasonal average last week as lower nuclear production boosted demand for the power-plant fuel, according to analyst estimates compiled by Bloomberg.

Inventories rose 67 billion cubic feet in the week ended April 29, according to the median of five estimates. The five- year average stockpile change for the week is an increase of 78 billion, according to Energy Department data. Supplies jumped 83 billion cubic feet a year earlier.

Gas futures volume in electronic trading on the Nymex was 199,959 as of 2:42 p.m., compared with the three-month average of 321,000. Volume was 279,182 yesterday. Open interest was 992,434 contracts. The three-month average open interest is 920,000.

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;

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

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