Natural Gas Futures Fall on Supply Report

Brian Hicks

Written By Brian Hicks

Posted November 19, 2012

Last week, the Energy Department stated that natural gas stockpiles decreased by 18 billion cubic feet, reaching 3.911 trillion (following a record peak the previous week).

This ran contrary to analyst estimates, such as those compiled by Bloomberg, which projected a drop of some 22 billion. In anticipation, prices had risen by 8.6 percent.

Businessweek reports:

“We had a panic buying spree and the market overbought this number,” said Stephen Schork, president of Schork Group Inc., a consulting group in Villanova, Pennsylvania. “It was a decent delivery. Given the weather outlook I don’t think this number is going to stand.”

Gas for December touched $3.703 per million Btu in New York on Thursday, a decline of 5.7 cents.

Energy Department reports showed that the decline week before last was less than the 5-year average change for that period: a gain of 17 billion cubic feet. Last year, inventories rose by 20 billion around that time.

The coming week or so will see higher-than-usual temperatures across the western majority of the nation, while the East Coast will see usual ranges or colder.

Back in April, gas prices crashed to a decade’s low due to a warm winter and the pressures of high production, but the impact of Sandy and a nor’easter in the East Coast has made it difficult to estimate any possible decrease in demand for natural gas for heating.

The Department’s report said the U.S. would produce an average 68.84 billion cubic feet per day through 2012—that’s a rise of 4 percent from 2011.

And while power facilities will consume 25.37 billion cubic feet of gas per day in 2012 (up 22 percent from last year), that’s going to drop by roughly 11 percent next year due to increases in gas prices and a consequent preference toward coal.

Nymex electronic trading had gas futures volume at 332,013 in the afternoon on Thursday last, with the 3-month average being 367,000, according to Businessweek.

Open interest was at 1.16 million contracts, with 3-month average at 1.14 million.

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