Friday, May 7, 2010

Too Much Gas Coming Up in the USA

By Moming Zhou
May 6 (Bloomberg) -- Natural gas futures fell for a second day after a government report showed that U.S. inventories of the factory and power-plant fuel rose more than forecast.
Supplies gained 83 billion cubic feet in the week ended April 30 to 1.995 trillion cubic feet, the Energy Department said. Analysts predicted an increase of 80 billion, based on the median of 25 estimates compiled by Bloomberg. The average increase for the week is 71 billion. Gas stockpiles were 19 percent higher than the five-year average.
“The data showed we got too much gas and it cannot be easily consumed, especially if the economy is not recovering,” said Michael Rose, director of trading at Angus Jackson Inc. in Fort Lauderdale, Florida. “I don’t think that we have enough demand, and the storage level will keep rising.”
Natural gas for June delivery fell 6.2 cents, or 1.6 percent, to settle at $3.929 per million British thermal units on the New York Mercantile Exchange, the closing price since April 30. Gas touched $3.855, the lowest intraday price since April 1. The futures have declined 29 percent this year.
U.S. gas production will increase 410 million cubic feet to 60.87 billion cubic feet a day this year, the department said last month in its Short-Term Energy Outlook. Production won’t show year-over-year declines until the first quarter of 2011.
The number of rigs drilling for gas in the U.S. has risen 44 percent from a seven-year low in July, according to data from Baker Hughes Inc.
“It’s not just a demand story,” said Tim Evans, an energy analyst at Citi Futures Perspective in New York. “We are also seeing production rising.”
Supply Record
Inventories reached a record 3.837 trillion cubic feet last November on increased supplies and lower consumption during the recession. U.S. stockpiles typically increase from April to November to assure adequate supplies to meet peak demand during the winter.
Prices also fell as forecasts for cooler weather signaled reduced need for electricity from gas-fired power plants for air conditioning.
“Early summer heat has not materialized, at least not enough to kick up significant cooling demand,” Mike Fitzpatrick, vice president of energy at MF Global in New York, said in a note to clients.
Temperatures will be mostly below average in the Midwest and the East Coast from May 11 through May 15, according to MDA Federal Inc.’s EarthSat Energy Weather of Rockville, Maryland.
Cool Weather
The temperature in New York will be 8 degrees below average on May 11, according to EarthSat. The city will have a high of 61 degrees Fahrenheit (16 Celsius) on May 11 and 66 on May 12.
Wholesale natural gas at the benchmark Henry Hub in Erath, Louisiana, fell 2.55 cents, or 0.6 percent, to $3.9704 per million Btu, according to data compiled by Bloomberg.
Gas futures volume in electronic trading on the Nymex was 206,855 contracts as of 2:44 p.m., compared with a three-month daily average total of 235,000. Volume was 171,910 yesterday. Open interest was 860,271 contracts, compared with the three- month average of 834,000. The exchange has a one-business-day delay in reporting open interest and full volume data.

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