Monday, September 29, 2008

Natural Gas Futures Down on Bailout Plan Uncertainty

Sept. 29 (Bloomberg) -- Natural gas futures declined in New York on concern a $700 billion U.S. government bailout plan for the financial industry may not be effective, threatening the economy and energy demand.

Industrial consumers, such as utilities and factories, might pare operations in a slowing economy, cutting demand for the fuel. A package was designed over the weekend and must now pass votes in the House and Senate.

``Without much idea what the economy will immediately look like, gas is just following crude and the rest of energy'' lower, said Lisa Zembrodt, commodity analyst at Summit Energy Services Inc. in Louisville, Kentucky. The package is ``the elephant in the room.''

Natural gas for November delivery fell 37.6 cents, or 4.9 percent, to $7.252 per million British thermal units at 12:04 p.m. on the New York Mercantile Exchange. The October contract expired Sept. 26. Natural gas has fallen 13 percent this month. Crude oil declined $7.73, or 7.2 percent, to $99.16 a barrel.

``People are concerned that the economy will go into the tank,'' said Ed Kennedy, a trader with Commercial Brokerage Corp. in Miami. The expectation is that ``crude and product demand will go down because of economic conditions.''

The U.S. economy expanded more slowly than earlier estimated in the second quarter, the Commerce Department said on Sept. 26. The annual rate of 2.8 percent was down from a preliminary estimate of 3.3 percent issued last month.

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