Natural Gas Futures Fall on Lower Demand as Recession Builds

By Reg Curren

Jan. 23 (Bloomberg) -- Natural gas fell for the seventh time in eight days in New York on slumping demand for the industrial fuel as the recession deepens.

Supplies are above the five-year average as diminished use by factories and manufacturers blunted withdrawals from storage as during the peak-demand heating season. Industrial users account for about 29 percent of U.S. gas demand and homeowners consume 20 percent, according to Energy Department data.

“All eyes are on the economy right now,” said Peter Beutel, president of energy consultant Cameron Hanover Inc. in New Canaan, Connecticut. “There seems to be plenty of gas and not plenty of demand.”

Natural gas for February delivery fell 6.6 cents, or 1.4 percent, to $4.615 per million British thermal units at 9:20 a.m. on the New York Mercantile Exchange. Prices have declined 18 percent this year.

Gas inventories stood at 2.736 trillion cubic feet in the week ended Jan. 9, the Energy Department said last week. The excess to the five-year average was 3.1 percent. The next update is scheduled for 10:30 a.m. today.

Supplies probably declined 175 billion cubic feet, according to the median of 19 analyst estimates compiled by Bloomberg. The average change for the week over the past five years is a decline of 126 billion cubic feet, Energy Department data show.

JPMorgan Chase & Co. cut its 2009 price outlook for natural gas futures by 5.2 percent as the recession in the U.S., Europe and Asia slashes demand.

Gas will average $5.69 per million Btu on the New York Mercantile Exchange this year, down from a forecast of $6 on Dec. 17, according to a report from Scott Speaker, JPMorgan’s natural gas strategist in New York.

“It has become clearer in the past month that severe manufacturing weakness will have an impact on natural gas demand that goes beyond a brief hiccup or temporary condition simply needing some producer-driven tightening,” Speaker said in the report.

The number of Americans filing their first unemployment- benefit claims matched a 26-year high, the government said yesterday.

Initial jobless claims increased by 62,000 to 589,000, more than forecast, in the week ended Jan. 17, from a revised 527,000 the prior week, the Labor Department said today in Washington.

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