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Natural Gas Falls After Lower-than-Expected Sales From GM, Ford

Natural gas futures fell in New York, reversing an earlier gain of 2.6 percent, after General Motors Co. and Ford Motor Co. reported U.S. sales in July that trailed analysts’ estimates, undermining speculation that manufacturing would bolster demand for the fuel.

GM’s sales rose 1.5 percent, including an adjustment for the number of selling days in July. The largest U.S. automaker was expected to report a 10 percent increase on that basis, the average estimate of five analysts surveyed by Bloomberg. Ford’s adjusted sales fell 0.7 percent, trailing estimates for a 10 percent gain.

“The car numbers from Ford kind of let the steam out of gas,” said Michael Rose, director of trading for Angus Jackson Inc. in Fort Lauderdale, Florida. “After the Ford numbers came out, it just started to slide a little bit.”

Natural gas for September delivery fell 6.2 cents, or 1.3 percent, to settle at $4.639 per million British thermal units on the New York Mercantile Exchange.

Orders placed with U.S. factories declined more than forecast in June, a sign manufacturing will cool in coming months, a Commerce Department report today showed. The 1.2 percent decrease in bookings was higher than the 0.5 percent drop projected in a Bloomberg News survey of economists and followed a revised 1.8 percent decline in May.

Gas prices have dropped 17 percent this year amid speculation that inventories will reach near-record highs by the end of October, as a recovering economy puts little pressure on a stockpile surplus. Industrial users account for about 28 percent of gas demand, according to the Energy Department.

Analyst Survey

Gas inventories will increase by 30 billion cubic feet the week ended July 30, according to the median of estimates from five analysts in a Bloomberg survey. Supplies climbed 28 billion cubic feet to 2.919 trillion in the week ended July 23, according to an Energy Department report on July 29.

Gas inventories at the end of October will reach 3.81 trillion cubic feet, the Energy Department estimated in its monthly Short-Term Energy Outlook on July 7. Stockpiles rose to a record 3.84 trillion cubic feet in November 2009.

The fuel had risen as high as $4.825 in earlier trading on speculation that electricity demand for air conditioning would boost purchases.

Excessive heat warnings and advisories today cover all or part of 15 states from Kansas to South Carolina and Illinois to the Gulf of Mexico, according to the National Weather Service. Coupled with humidity, temperatures will feel as hot as 115 degrees Fahrenheit (46 Celsius) in some areas.

Power Plants

Electricity use for air conditioning will be 26 percent above normal today throughout the U.S., and will stay above normal through August 10, David Salmon, a meteorologist with Weather Derivatives of Belton, Missouri, said in a daily report.

“We remain range bound between $4.50 and $5 until we get more into the meat of the hurricane season,” said Kyle Cooper, managing director at energy consultant IAF Advisors in Houston.

Tropical storm Colin, approaching the southeastern Caribbean Sea from the Atlantic, was upgraded from a tropical depression, the National Hurricane Center said today. The system, with maximum sustained winds of 40 miles (65 kilometers) an hour, is about 945 miles east of the Lesser Antilles islands moving west-northwest at 23 mph, the center said on its website.

“If anything, it looks like it’s going to be a bearish event,” Cooper said. It’s probably not going to come into the Gulf of Mexico. It’ll probably stay out in the Atlantic or skim the East Coast, which will bring lower temperatures and rain.”

Wholesale natural gas at the benchmark Henry Hub in Erath, Louisiana, fell 16.11 cents, or 3.3 percent, to $4.7816 per million Btu on the Intercontinental Exchange.

Gas futures volume in electronic trading on the Nymex was 250,060 as of 3:03 p.m., compared with a three-month average of 253,000. Volume was 265,556 yesterday. Open interest was 783,536 contracts, compared with the three-month average of 820,000. The exchange has a one-business-day delay in reporting open interest and full volume data.

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