Natural Gas Falls on Signs of Ample Supply, Faltering Economy

By Mario Parker

Oct. 27 (Bloomberg) -- Natural gas futures in New York fell on signs supply will be ample for the winter heating season and on concern the weaker economy will slow demand.

Stockpiles of natural gas now exceed the five-year average of 3.327 trillion cubic feet on hand at the start of the heating season in early November by 93 billion cubic feet.

``We're basically well-supplied and there are no disruptions on the horizon,'' said Michael Rose, a director of trading at Angus Jackson Inc. in Fort Lauderdale, Florida. ``There's also some liquidation going on across all commodities.''

Natural gas for November delivery fell 6.4 cents, or 1 percent, to $6.175 per million British thermal units at 9:46 a.m. on the New York Mercantile Exchange. Futures touched $5.99, the lowest since Sept. 24, 2007, when they traded at $5.916.

``You have some liquidation on margin calls,'' Rose said. ``People are trying to free up equity.''

Stockpiles advanced 70 billion cubic feet in the week ended Oct. 17 to 3.347 trillion cubic feet, the Energy Department said Oct. 23. Sufficient supplies in storage help utilities and large industrial consumers meet demand during the cold-weather season, when usage outstrips production.

About 40 percent of natural gas demand in the U.S. originates with commercial and industrial consumers, who tend to cut back in times of economic weakness.

``You have a confluence of three events,'' said Scott Hanold, an analyst at RBC Capital Markets in Minneapolis. ``The economic outlook continues to not look pretty, there are forecasts for warm weather and crude oil is down.''

Warmer Weather

Weather across most of the U.S. will be warmer than normal starting Nov. 1, according to the 10-day outlook from the Climate Prediction Center in Camp Springs, Maryland. Demand for the heating and industrial fuel peaks during the cold weather months.

Crude oil futures in New York declined $1.17, or 1.8 percent, to $62.98 a barrel. Futures touched $61.30, the lowest since May 9, 2007. Prices are down 32 percent from a year ago.

Global oil demand may decline for the first time in 15 years in 2008 and stagnate next year, the Centre for Global Energy Studies said Oct. 20. OPEC, the International Energy Agency and the U.S. Energy Department all cut their forecasts for growth earlier this month.

To contact the reporters on this story: Mario Parker in Chicago at mparker22@bloomberg.net;