Natural Gas Futures Fall as Crude Oil Declines, Dollar Advances

By Reg Curren

Aug. 8 (Bloomberg) -- Natural gas in New York declined to the lowest in six months as crude oil fell and the U.S. dollar climbed, dulling the allure of commodities as an investment alternative.

Crude has plunged more than $30 since touching a record $147.27 in New York on July 11. The dollar gained the most in more than four years against the euro amid an outlook for major world economies to slow. Mild weather is also limiting the demand for gas-fired power generation to run air conditioners.

The stronger dollar is playing a role, as are slumping crude prices, said Cameron Horwitz, an analyst at SunTrust Robinson Humphrey in Houston. ``Weather forecasts for cooler-than-normal temperatures to linger through the middle of August are also keeping a damper on things.''

Natural gas for September delivery fell 30.3 cents, or 3.5 percent, to $8.268 per million British thermal units at 10:46 a.m. on the New York Mercantile Exchange. Futures have fallen 38 percent since June 30 as supplies expanded and crude oil prices declined. Gas earlier touched $8.253, the lowest since Feb. 8.

``Crude is whacking everything,'' said Stephen Briggs, a partner at Intermarket Management LLC in Verona, New Jersey. ``It's red across the commodity screens as the dollar gets stronger.''

Crude oil for September delivery fell $3.25, or 2.7 percent, to $116.77 a barrel in New York. Prices have fallen 7 percent so far this week.

Oil may fall next week amid weakening demand caused by a global economic slowdown. Thirteen of 35 analysts surveyed by Bloomberg News, or 37 percent, said prices will drop through Aug. 15. Twelve of the respondents, or 34 percent, said oil will rise and 10 forecast little change.

The euro traded at $1.5046 to the dollar at 10:48 a.m. in New York from $1.5325 yesterday.

Milder Weather

Below-normal temperatures are probable in much of the eastern half of the U.S. through Aug. 17, according to the Climate Prediction Center in Camp Springs, Maryland.

Gas supplies are also near the five-year average for this time of year, the Energy Department said in a report yesterday.

With almost three months left before injections cease because of heating demand, analysts expect inventories to reach 3.4 trillion cubic feet. The five-year average in storage to start winter on Nov. 1 is 3.327 trillion.

Stockpiles increased 56 billion cubic feet in the week ended Aug. 1, to 2.517 trillion cubic feet, the Energy Department said. The average change for this time of year over the past five is 50 billion cubic feet.

Supplies would need to expand at about 57 billion cubic feet a week from now until Oct. 31 to match the five-year average.

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