Natural Gas Declines on Outlook Economy to Weaken, Crude Slumps

By Reg Curren

Aug. 22 (Bloomberg) -- Natural gas in New York fell amid speculation demand will decline as the U.S. economy slows and as crude oil slumped.

Turmoil in world credit markets will continue to hamper the global economy and there's little central banks can do to correct it, analysts said. Crude slipped as the U.S. dollar strengthened and the flow of oil was restored through a Caspian Sea pipeline in Turkey. A rising dollar prompts investors using commodities as an inflation hedge to exit the market.

Gas is ``taking a cue from crude,'' said Tom Orr, director of research at Weeden & Co. in Greenwich, Connecticut. ``There's nothing'' to lift gas today.

Natural gas for September delivery fell 6.9 cents, or 0.8 percent, to $8.184 per million British thermal units at 9:55 a.m. on the New York Mercantile Exchange. Futures have tumbled 40 percent since closing at $13.577 on July 3, a 30-month high. Gas is selling below its 200-day moving average of $9.593.

Crude oil for October delivery fell $2.48, or 2.1 percent, to $118.70 a barrel in New York. Futures reached a record $147.27 on July 11.

In the U.S., borrowing premiums for banks and corporations are at their highest in months, prolonging the drag on growth.

Reports in the last week showing a surge in inflation reinforce expectations that Federal Reserve Chairman Ben S. Bernanke will have to keep U.S. interest rates on hold.

Dollar Declines

The dollar traded at $1.4815 at 9:56 a.m. in New York from $1.4899 yesterday. The U.S. currency has climbed versus the euro since touching an all-time low of $1.6038 on July 15.

Mild weather and higher gas inventory growth are also weighing on gas, Orr said. Moderate weather limits the demand for gas-fired power generation to run air conditioners.

The U.S. Energy Department reported supplies increased for the week ended Aug. 15. Inventories rose 88 billion cubic feet to 2.655 trillion, the department said. Stockpiles are 1 percent above the five-year average of 2.629 billion, according to department data.

Analysts expected supplies to gain 84 billion cubic feet. The average change for this time of year over the past five is an increase of 56 billion.

To contact the reporters on this story: Reg Curren in Calgary at rcurren@bloomberg.net.