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Natural Gas Futures Decline on Moderating Weather Forecasts

Nov. 30 (Bloomberg) -- Natural gas futures fell for a second day in New York on forecasts of above-normal temperatures in the central U.S. that may limit demand for the heating fuel.

Futures dropped as warmer-than-normal weather is likely in the central and southwestern U.S. from Dec. 10 through Dec. 14, according to MDA Federal Inc.’s EarthSat Energy Weather in Rockville, Maryland. Temperatures may be normal in the Northeast and Great Lakes region during that period, MDA said.

“The cold would really have to be sustained for prices to maintain this level,” said Jay Levine, the president of Enerjay LLC, an energy advisory company in Portland, Maine. “We still have an overhang of supply.”

Natural gas for January delivery fell 3 cents, or 0.7 percent, to settle at $4.18 per million British thermal units on the New York Mercantile Exchange. Gas futures rose 3.5 percent this month and have dropped 25 percent this year.

The low temperature in Detroit on Dec. 11 may be 28 degrees Fahrenheit (minus 2 Celsius), 3 degrees above normal, according to AccuWeather Inc. in State College, Pennsylvania.

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

“People are trying to determine which way the weather is going to go,” said Mike Rose, the director of energy trading for Angus Jackson Inc. in Fort Lauderdale, Florida. “We’re still very well supplied, and until we see higher industrial demand, I think we’re going to sit at these levels.”

U.S. gas production rose 3.7 percent in September as output from onshore wells increased, the Energy Department reported yesterday.

Gas Production

Output climbed to 75.14 billion cubic feet a day from a revised 72.44 billion in August, the department’s Energy Information Administration said in a monthly report known as EIA-914.

Inventories of the fuel in the week ended Nov. 19 were 9.5 percent above the five-year average, wider than a 9.3 percent surplus the previous week, the Energy Department said on Nov. 24. Stockpiles fell 6 billion cubic feet to 3.837 trillion cubic feet, according to the department.

The total number of oil and natural-gas rigs operating in the U.S. rose last week, led by an increase in natural-gas drilling, according to data published today by Baker Hughes Inc.

Gas rigs rose by 17 to 953, Baker Hughes said. The total was down 41 percent from a peak of 1,606 in September 2008.

Wholesale natural gas at the benchmark Henry Hub in Erath, Louisiana, rose 4.42 cents, or 1.1 percent, to $4.1627 per million Btu on the Intercontinental Exchange.

Gas futures volume in electronic trading on the Nymex was 170,271 as of 2:55 p.m., compared with a three-month average of 271,000. Volume was 245,547 yesterday. Open interest was 757,873 contracts, compared with the three-month average of 800,000. 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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