US GAS: Futures Reach Four-Month Low On Weather, Supplies
03/17/2010 02:31PM
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NEW YORK (Dow Jones)--Natural gas futures continued to drift lower Wednesday, hitting a new four-month low amid high production levels and balmy temperatures in the eastern U.S.
Natural gas for April delivery on the New York Mercantile Exchange settled 4.4 cents, or 1.01%, lower at $4.303 a million British thermal units after reaching a low of $4.28/MMBtu earlier in the day. The settlement price was the lowest since late November.
"It's the same grind to the downside that we've been seeing," said Tim Evans, an analyst with Citi Futures Perspective in New York. "We don't have the demand. This week's temperatures, in particular, are quite mild."
Unusually warm weather is expected to limit gas heating demand over the next few weeks. The National Weather Service forecast for March 24 to March 30 predicts warmer-than-normal temperatures across the Northeast and the Mid-Atlantic and below-normal temperatures in parts of the Midwest. Meteorologists with private forecaster MDA EarthSat Weather see warmer-than-normal temperatures across the Northeast and the Midwest during that same period.
Gas from onshore shale-rock formations has continued to flood the market despite falling prices. Advances in drilling technology have made it economic for gas producers to extract the fuel from these previously hard-to-reach areas, and U.S. inventories have remained ample despite large withdrawals from storage during the winter heating season.
Weekly draws from gas storage are shrinking as spring approaches.
Analysts and traders expect government data scheduled for release Thursday to show a smaller-than-average draw from gas inventories as mild temperatures last week stifled heating demand for the fuel. The U.S. Energy Information Administration is expected to report that 28 billion cubic feet of gas were withdrawn from storage during the week ended March 12, according to the average prediction of 19 analysts and traders in a Dow Jones Newswires survey.
The EIA is scheduled to release its storage data Thursday at 10:30 a.m. ET.
The storage estimate falls short of last year's 42-bcf pull from storage and the five-year average draw, which was 65 bcf. If the estimate is correct, inventories as of March 12 will total 1.598 trillion cubic feet, 3.6% above the five-year average and 3.4% below last year's level.
"A sustained trend toward warmer-than-average temperatures has left us with substantially decreasing demand in an environment of adequate supply," Ben Smith, the president of First Enercast Financial in Denver, Colo., wrote in a note to clients.
-By Christine Buurma, Dow Jones Newswires; 212-416-2143; christine.buurma@dowjones.com