Natural Gas Falls on Concern Energy Demand to Decline Further

By Reg Curren

Jan. 20 (Bloomberg) -- Natural gas in New York fell for the fifth consecutive trading day on speculation energy consumption will slide further amid a deepening global recession.

Industrial demand for gas was 2 billion cubic feet a day less in December than a year earlier, Cameron Horwitz, an analyst at Sun Trust Robinson Humphrey in Houston, said in a note, citing Federal Reserve data. Industrial users accounted for 29 percent of U.S. consumption in 2007, according to the Energy Department.

“The economic concerns are first and foremost right now,” said Phil Flynn, senior trader at Alaron Trading Corp. in Chicago. “It’s going to be a very tough year for natural gas.”

Natural gas for February delivery fell 9.5 cents, or 2 percent, to $4.706 per million British thermal units at 9:21 a.m. on the New York Mercantile Exchange. The futures touched $4.761, the lowest price since Sept. 27, 2006. Gas futures have declined 16 percent this month.

Demand from chemical makers and other large consumers of gas may fall 3 percent in 2009, the Energy Department said in a report on Jan. 13.

Crude oil for February delivery fell $1.59, or 4.4 percent, to $34.92 a barrel in New York.

“Oil being down because of the Gaza Strip and gas flowing from Russia is also putting pressure on prices,” said Flynn.

Ukraine and Russia reached an agreement to end a dispute that had disrupted flows of natural gas to Europe. A cease-fire in the Gaza Strip began on Jan. 18 and is holding so far.

Inventories of natural gas stood at 2.736 trillion cubic feet in the week ended Jan. 9, the department said last week. The surplus to the five-year average was 3.1 percent.

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