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Natural Gas Falls After Smaller-Than-Forecast Stockpile Decline

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Feb. 7 (Bloomberg) -- Natural gas futures fell for the first time this week after a government report showed that U.S. stockpiles declined by less than forecast last week.

Gas slipped 3.9 percent after the Energy Information Administration report showed inventories decreased by 118 billion cubic feet in the week ended Feb. 1 to 2.684 trillion cubic feet. Analyst estimates compiled by Bloomberg showed an expected withdrawal of 127 billion. A survey of Bloomberg users predicted a drop of 125 billion.

“It was a bearish storage report and inventories are still plentiful,” said Dominick Chirichella, senior partner at the Energy Management Institute in New York. “When you peel the onion back, there’s nothing bullish about gas in the medium term to longer term.”

Natural gas for March delivery fell 13.3 cents to settle at $3.285 per million British thermal units on the New York Mercantile Exchange. Prices are up 33 percent from a year ago. Volume was 51 percent above the 100-day average.

March $3.70 calls were the most active gas options in electronic trading. They were 1.5 cents lower at 0.6 cent on volume of 1,193 contracts as of 4:27 p.m. Calls accounted for 53 percent of options volume.

Gas for April delivery traded 6 cents above the March contract, compared with 4.6 cents yesterday.

Stockpile Report

The stockpile decrease was smaller than the five-year average decline for the week of 165 billion cubic feet, department data show. A surplus to the five-year average rose to 15 percent from 12.2 percent the previous week. Supplies were 7.8 percent below year-earlier inventories, compared with 6.7 percent last week.

“That inventory number was very fundamentally bearish,” said Brison Bickerton, a managing director at Freepoint Commodities LLC in Greenwich, Connecticut. “Importantly, it was bearish to expectations. You are talking about a 9 bcf miss and that’s pretty big for the market.”

A winter storm starting tomorrow will bring lower temperatures and increased heating demand to the Northeast, according to the National Weather Service. Boston may receive 24 inches (61 centimeters) of snow and blizzard conditions may envelop Suffolk County on Long Island.

MDA Weather Services in Gaithersburg, Maryland, said the weather will turn warmer in the eastern U.S. once the storm passes. Temperatures may be normal or higher-than-average in the Northeast and Great Lakes region from Feb. 12 through Feb. 16, MDA said.

Record Warmth

The low in New York on Feb. 13 may be 36 degrees Fahrenheit (2 Celsius), 7 higher than the typical reading, according to AccuWeather Inc.

About 50 percent of U.S. households use gas for heating, data from the Energy Information Administration show. The agency is part of the Energy Department.

Last year was the warmest in records going back to 1895 for the 48 contiguous U.S. states and the second-worst for weather extremes including drought, hurricanes and wildfires, according to the National Oceanic and Atmospheric Administration.

Natural gas production in the lower-48 states rose to a record in November as more of the fuel was pumped from shale wells in the Northeast.

Output increased 0.6 percent to 73.88 billion cubic feet a day from a revised 73.47 billion in October, the Energy Information Administration said in the monthly EIA-914 report, released Jan. 31 in Washington.

Shale Gas

Supplies from the “other states” category rose 1.4 percent to 24.29 billion cubic feet a day from a revised 23.96 billion in October. Production advanced as “some operators reported new wells coming online in the Marcellus shale play,” the EIA said in the report.

Output rose to an all-time high of 28.5 trillion cubic feet in 2011, led by record output from shale deposits, the EIA said in a Jan. 7 report. Shale accounted for 30 percent of total production in 2011, up from 22 percent the previous year.

The boom in oil and natural gas production helped the U.S. cut its reliance on imported fuel. America met 84 percent of its energy needs in the first 10 months of last year, government data show. If the trend goes on through 2012, it will be the highest level of self-sufficiency since 1991.

To contact the reporters 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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