US GAS: Futures End Lower On Mild Weather, Robust Supply
11/02/2009 02:57PM
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HOUSTON (Dow Jones)--Natural gas futures ended lower Monday amid mild weather forecasts and ample supplies of the fuel, despite economic data that shows demand for the fuel could be improving.
Natural gas for December delivery on the New York Mercantile Exchange settled 22.1 cents, or 4.38%, lower, at $4.824 a million British thermal units. The contract fell as low as $4.817/MMBtu in earlier trading.
Natural gas prices are facing pressure from record-high stockpiles of the fuel and expectations for mild weather that are unlikely to spur additional demand for gas to heat homes and businesses.
"This remains in the near term a weather market above and beyond everything else," said Tim Evans, an analyst with Citi Futures Perspective in New York.
The National Weather Service forecast for Nov. 9 to Nov. 15 calls for above-normal temperatures across parts of the Midwest and near normal temperatures in the Northeast.
Those mild temperatures can stifle demand for the fuel and contribute to adding additional natural gas to storage, extending the natural gas injection season, analysts said.
Natural gas in U.S. storage for the week ended Oct. 23 stands at an all-time high of 3.759 trillion cubic feet - 11% higher than last year and 12.4% above the five year average. Natural gas in storage is expected to test estimated storage capacity of 3.9 trillion cubic feet before winter heating season begins drawing down the stockpiles in storage.
"Mild temperatures and full storage are the focus again," Mike Fitzpatrick, an analyst with MF Global in New York, wrote in a note to clients, adding that the basics of supply and demand are "hard to trump."
At the same time, the Institute of Supply Management said on Monday that its index of manufacturing activity jumped to 55.7 last month, up from 52.6 in September. A number above 50 indicates expansion in manufacturing.
Analysts and traders have closely watched the index for sings that industrial demand for natural gas, which accounts for about a third of U.S. consumption, is growing, and that the economy is recovering.
However, Stephen Schork, editor of the energy advisory newsletter The Schork Report, said that robust production has allowed the natural gas market to shrug off the data.
"We are still producing a lot of natural gas," Schork said.
The U.S. Energy Information Administration reported last week that daily gross natural gas production in the lower-48 states climbed to 63.17 billion cubic feet in August, an increase of 0.8% from July. The production increase came amid some expectations for further declines in output resulting from a brisk pullback in U.S. drilling activity.
FUTURES SETTLEMENT NET CHANGE
Nymex Dec $4.824 -22.1c
Nymex Jan $5.162 -22.8c
Nymex Feb $5.217 -22.7c
CASH HUB RANGE PREVIOUS DAY
Henry Hub $4.27-$4.38 $3.97-$4.33
Transco 65 $4.35-$4.42 $4.48-$4.65
Tex East M3 $4.74-$4.85 $4.47-$4.60
Transco Z6 $4.77-$4.91 $4.48-$4.65
SoCal $4.34-$4.61 $4.19-$4.65
El Paso Perm $4.19-$4.34 $3.94-$4.18
El Paso SJ $4.17-$4.35 $3.86-$4.17
Waha $4.20-$4.35 $4.00-$4.18
Katy $4.22-$4.38 $4.05-$4.20
-By Jason Womack, Dow Jones Newswires; 713-547-9201; jason.womack@dowjones.com