NYMEX Natual Gas Price Falls with Oil Price

Natural Gas Declines Amid Speculation Economic Growth to Slow

By Mario Parker

July 8 (Bloomberg) -- Natural gas in New York declined, following crude oil, amid concern the U.S. economy is slowing and energy demand will fall.

Oil fell as much as $6 a barrel as other commodities tumbled for the third straight session and the dollar rose against the euro. The Reuters/Jefferies CRB Index of 19 raw materials fell 10.99 points, or 2.4 percent, to 448.05. Yesterday, the gauge tumbled 2.8 percent, the most since March.

``The primary drivers of natural gas are crude oil and heat,'' said George Hopley, an analyst at Barclays Capital Inc. in New York. ``If the overall economy isn't backing crude oil, then you can say that's affecting natural gas'' and summer temperatures are not excessive.

Natural gas for August delivery fell 60.9 cents, or 4.7 percent, to settle at $12.368 per million British thermal units at 3:12 p.m. on the New York Mercantile Exchange. That's the biggest one-day decline since March 17, when it fell 7.8 percent to $9.10 per million Btu. Gas has advanced 66 percent this year.

Gas has slipped $1.21 per million Btu since closing at $13.577 on July 3, the highest price since Dec. 21, 2005.

``We're probably seeing some longs sell their positions,'' said Peter Beutel, president of energy consultant Cameron Hanover Inc. in New Canaan, Connecticut. ``A lot of this is part of a liquidation going on throughout'' commodities.

Speculative long positions are trades placed anticipating future prices will advance.

Following Oil

Gas is following oil, said James Ritterbusch, president of Ritterbusch & Associates in Galena, Illinois. Plus, the U.S. dollar is ``firming'' against the euro and there is ``some follow-through from yesterday'' when gas declined 4.4 percent.

Crude oil for August delivery slid $5.33, or 3.8 percent, to settle at $136.04 a barrel in New York. Futures earlier fell as low as $135.14 and have risen 42 percent so far this year. Oil reached a record $145.85 on July 3.

``The same thing that drove natural gas prices up is the same thing that's driving them down,'' said Chris Jarvis, president of Caprock Risk Management LLC in Hampton Falls, New Hampshire. ``Crude oil is driving the whole energy complex and natural gas is held hostage.''

Gas also declined as Hurricane Bertha weakened to a Category 2 storm as it passed over the Atlantic hundreds of miles from the U.S. mainland, the National Hurricane Center said.

Bertha Stands Down

Last week natural gas traders bought contracts amid speculation Bertha would move into the Gulf of Mexico over the extended July 4 holiday weekend in the U.S., said Lisa Zembrodt, a commodity analyst at Summit Energy Services Inc. in Louisville, Kentucky. When Bertha veered away from the Gulf it signaled ``good news'' and gas prices fell, she said.

Below-normal temperatures are probable for the U.S. Midwest, starting July 20, the U.S. Climate Prediction Center in Camp Springs, Maryland, said in an outlook yesterday.

Mild weather typically reduces demand from gas-fired power plants for electricity to run air conditioners.

``Look at your air conditioner. Do you want to change it from where it was last month?'' said Hopley. ``And there's only one more month of peak summer demand. There's further capitulation on the demand side.''