By Reg Curren
March 12 (Bloomberg) -- Natural gas futures fell to the lowest price in 16 weeks in New York as milder-than-normal weather was expected to limit demand and ample supplies were left in storage. Above-normal temperatures are forecast to stretch from the Midwest and into New York through March 21, according to Commodity Weather Group of Bethesda, Maryland. About 52 percent of U.S. households rely on natural gas for heating. A government report yesterday showed stockpiles above the five-year average.
“We’re in a new era for natural gas,” said Phil Flynn, vice president of research at PFGBest in Chicago. “We’ve found all this new, unconventional gas, and proven reserves are on the rise. We’ll probably get to full storage sooner than ever.”
Natural gas for April delivery fell 4 cents, or 0.9 percent, to settle at $4.40 per million British thermal units on the New York Mercantile Exchange, the lowest closing price since Nov. 19. The contract has declined 21 percent this year.
An Energy Department report yesterday showed stockpiles were 1.2 percent above the five-year average level for last week, signaling there will be sufficient supplies of the fuel to meet demand.
Inventories were pushed to a record 3.837 trillion cubic feet last November on higher U.S. production and weak demand because of the recession. Frigid weather in December and early January helped to soak up excess supply. The declines have slowed with March weather milder than previously forecast.
Slowing Withdrawals
“Withdrawals might not have much longer to live as the spring could bring an injection as early as the third week of March,” Biliana Pehlivanova, an analyst at Barclays Capital in New York, said in a note to clients. “Time appears to have run out to meaningfully work off inventories.”
She forecast supplies in storage at the end of March will be about 1.6 trillion cubic feet, above the five-year average level of 1.489 trillion.
Natural gas futures will probably decline next week, according to a Bloomberg News survey. Seven of 14 analysts, or 50 percent, predicted prices will fall through March 19.
Utilities and other large users of gas typically begin rebuilding inventories in early April as cold-weather demand dissipates. Stockpiles typically gain until the end of October and the return of lower temperatures in the U.S.
The number of gas drilling rigs rose by one to 927 this week, up 39 percent from a seven-year low reached in July, according to Baker Hughes Inc. data. Increased exploration may boost gas production later this year.
Moving Averages
Technical indicators suggest natural gas prices are at inflection point as the futures trade near the 200-day moving average, Michael Fitzpatrick, vice president of energy at MF Global in New York, said in a telephone interview.
“It’s an important milestone,” he said. “If it holds, we’ll have a full-blown reversal. If it goes through and it settles down below the 200-day tonight, we might get a push to $4 pretty quick.”
The 200-day moving average was $4.4056 per million Btu at the settle, according to Bloomberg data.
Moving averages are watched by some technical traders who monitor patterns for clues to price direction and may sell or buy based on those signals.
Wholesale natural gas at the benchmark Henry Hub in Erath, Louisiana fell 12.73 cents, or 2.9 percent, to $4.3448 per million Btu, according to data compiled by Bloomberg.
Gas futures volume in electronic trading on the Nymex was 120,908 contracts as of 3:15 p.m., compared with a three-month daily average of 227,000. Volume totaled 239,223 yesterday. Open interest was 866,906 contracts, compared with the three-month average of 771,000. The exchange has a one-business-day delay in reporting open interest and full volume data.
To contact the reporter on this story: Reg Curren in Calgary at rcurren@bloomberg.net
Last Updated: March 12, 2010 16:01 EST
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