Natural Gas Falls on Forecasts for Above-Average Storage Gain

By Reg Curren

Sept. 4 (Bloomberg) -- Natural gas futures declined on forecasts a government report today will show U.S. supplies gained more than average last week.

Stockpiles rose 90 billion cubic feet in the week ended Aug. 29, according to the median of 19 analyst estimates compiled by Bloomberg. Stockpiles in the same week over the past five years advanced an average 59 billion cubic feet, according to the Energy Department, which reports on inventories today.

``The demand side of the equation has been obliterated and that's making the oversupply look even more abundant,'' said Phil Flynn, senior trader at Alaron Trading Corp. in Chicago. ``With Gustav we probably lost more demand than supply. With all of those customers being down,'' it cuts power usage.


Natural gas for October delivery fell 8.1 cents, or 1.1 percent, to $7.183 per million British thermal units at 9:06 a.m. on the New York Mercantile Exchange. Gas yesterday touched $7.028 per million Btu, the lowest since Dec. 27 and has fallen 47 percent since reaching a 30-month closing high on July 3.

Analysts expect U.S. winter inventories to approach last year's record of 3.545 trillion cubic feet by early November.

Louisiana's power grid is still under repair after Gustav ripped through the state on Sept. 1, cutting demand for gas to run power plants. The storm caused offshore gas and oil production to be shut, though platforms in the Gulf of Mexico sustained little or no damage and output is being restored.

More than 620,000 homes and businesses in Louisiana were without power last night, down from almost 743,000 yesterday morning, Entergy Corp. said today on its Web site. Including utilities in Arkansas and Louisiana, Entergy has more than 701,000 customers still without electricity.

Atlantic Storms

Three storms are being tracked by National Hurricane Center in Miami. Tropical Storm Hanna just east of the Bahamas, will move near the southeast coast of the U.S. by late Friday.

Hurricane Ike, located about 550 miles (890 kilometers) northeast of the Leeward Islands, may take a path toward Florida. Ike is a Category 4 storm on the 5-step Saffir-Simpson intensity scale. A third system, Tropical Storm Josephine, is moving through open waters in the eastern Atlantic.

``We'd have lower prices without those storms,'' said Flynn. ``It's still too early'' to put any risk premium on for Ike.

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