Natural Gas Falls on Forecast for Mild Weather in Midwest, East

By Reg Curren

March 13 (Bloomberg) -- Natural gas dropped in New York as above-normal temperatures forecast for the Midwest and Northeast in the coming days will limit demand for the heating fuel at a time when inventories are higher than average.

Highs will reach 56 degrees Fahrenheit (13 Celsius) in Chicago by March 16, about 10 degrees above normal, according to MDA Federal Inc.’s EarthSat Energy of Rockville, Maryland. Almost three quarters of Midwest households rely on gas for heating.

“The weather isn’t a factor and we’ve got ample supplies,” said Michael Rose, a director of trading at Angus Jackson Inc. in Fort Lauderdale, Florida.

Natural gas for April delivery fell 1.8 cents, or 0.5 percent, to $3.977 per million British thermal units at 10:57 a.m. on the New York Mercantile Exchange. Gas futures have declined 29 percent this year. The heating and industrial fuel advanced 5.2 percent yesterday, the biggest increase in almost 10 weeks.

Inventories in storage last week were 13 percent higher than the five-year average, an Energy Department report yesterday showed. Supplies were 14 percent higher the previous week.

Stockpiles dropped 112 billion cubic feet in the week ended March 6 to 1.681 trillion cubic feet, the Energy Department said.

Prices also fell as some traders sold contracts after yesterday’s move higher, said Rose.

“There’s absolutely going to be some sort of pullback,” Rose said. “These one-day huge moves to the upside lead to, somewhere down the road, big moves to the downside. A steady climb is good.”

Heating Fuel

The approaching end of the cold-weather season in the U.S., combined with slack industrial demand for gas, suggests prices will have a difficult time staying above $4 per million Btu, said Jim Ritterbusch, president of Ritterbusch & Associates in Galena, Illinois.

“The weather forecasts I’m seeing in the six-to-15-day time period aren’t stretched too far from normal,” he said. “For all practical purposes, the normal forecast out to March 28 virtually brings an end to weather as a factor in this market.”

Stockpiles will probably finish the end of the withdrawal season this month around 1.65 trillion cubic feet, Ritterbusch said. The average over the past five years is 1.36 trillion, according to the Energy Department.

The recession has cut demand for energy as companies closed plants in response to slowing sales of their products.

Industrial gas consumption in November was 4.3 percent less than the same month in 2007, and in December demand was down 10 percent from a year earlier, the department said on Feb. 26. Manufacturers account for 29 percent of gas consumption.

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