Natural Gas Declines Before Government Report on Inventories

By Reg Curren

Oct. 23 (Bloomberg) -- Natural gas futures fell before a government report today that may show U.S. stockpiles gained more than average for this time of year, putting ample amounts of the fuel in storage to meet cold-weather demand.

Inventories probably increased 75 billion cubic feet in the week ended Oct. 17, according to the median of 20 analyst estimates compiled by Bloomberg. The average change over the past five years is an increase of 62 billion cubic feet, according to U.S. Energy Department data.

``Clearly, the market is well supplied,'' said George Ellis, a director in the energy derivatives group at BMO Capital Markets in New York. ``There is some talk the U.S. winter may not be that cold in the consuming east regions.''

Natural gas for November delivery fell 4.8 cents, or 0.7 percent, to $6.729 per million British thermal units at 9:11 a.m. on the New York Mercantile Exchange. Gas has dropped 10 percent this year.

A worsening economic outlook in the U.S. is also dragging gas lower, Ellis said.

The number of Americans filing first-time claims for unemployment benefits increased last week, a sign the credit crisis is hurting employment. Initial jobless claims increased by 15,000 to a larger-than-forecast 478,000 in the week ended Oct. 18, from a revised 463,000 the prior week, the Labor Department said today in Washington.

A slowing economy would cut demand from commercial and industrial users of gas, which accounted for 9.64 trillion cubic feet, or 42 percent, of consumption in the U.S. in 2007.

Gas stockpiles were 85 billion cubic feet, or 2.7 percent, above the five-year average in last week's supply report.

Storage levels will probably reach 3.47 trillion cubic feet by the end of the month, George Hopley, an analyst at Barclays Capital Inc. in New York, said in a report this week. The five- year average for storage to start the cold-weather season in November is 3.327 trillion cubic feet.

The Energy Department is scheduled to release its supply report at 10:35 a.m. in Washington.

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