Natural-Gas Futures Slide, Pressured by Lower Wholesale Prices
2004-10-12 12:42 (New York)
Natural-Gas Futures Slide, Pressured by Lower Wholesale Prices
By Jim Kennett
Oct. 12 (Bloomberg) -- Natural-gas futures fell for a third
session, narrowing the price spread with supplies for next-day
delivery amid signs of ample storage before winter.
Traders in regional markets were reluctant to follow a 50
percent rally in futures from mid-September to early October.
U.S. gas inventories that are about 7 percent above normal levels
helped keep gas at the Henry Hub in Louisiana more than $1
cheaper than November futures, six times the normal spread.
``It's been one of the great mysteries, how long these
prices could hold up with cash as soft as it is,'' said Bill
O'Grady, director of fundamental futures research at A.G. Edwards
& Sons Inc. in St. Louis. ``There're really no significant
storage problems.''
Gas for November delivery fell 20.3 cents, or 2.9 percent,
to $6.79 per million British thermal units at 12:23 p.m. on the
New York Mercantile Exchange. The contract is down 6.4 percent
since Oct. 7. Year to date, gas has averaged about $5.86 per
million Btu, the highest for the period since futures began
trading in 1990.
Gas for next-day delivery at the Henry Hub yesterday traded
at $5.63 per million Btu on the Intercontinental Exchange, an
electronic energy market run from Atlanta. The price was more
than a dollar cheaper than Nymex gas for November delivery for
seven straight sessions through yesterday. The average spread is
18.4 cents, according to Bloomberg data.
Nymex gas is delivered at the Henry Hub after a contract
expires, often forcing prices at the two points to come together.
The spread between November and January futures was about
$1.70 per million Btu, almost double the three-month average. The
spread between the contracts a year earlier was about 54 cents.
High Inventories
Inventories stood at 3.092 trillion cubic feet the week
ended Oct. 1, according to the U.S. Energy Department. With four
weeks left until the traditional start of the heating season on
Nov. 1, utilities need to store 27 billion cubic feet a week to
reach the 3.2 trillion cubic-foot level considered by many
analysts to be adequate for winter needs.
Inventories probably rose by 70 billion cubic feet last
week, the median estimate of 10 analysts polled by Bloomberg.
That compares with 56 billion on average for the week over the
previous five years, and 77 billion a year earlier.
The estimate from Bloomberg inventory surveys has been
within an average 4.3 billion cubic feet of the actual storage
number for the past 10 weeks.
Temperatures in the U.S. were 14 percent above normal last
week, according to figures weighted for gas-furnace use from the
National Oceanic and Atmospheric Administration.
Prices from late September into last week rose on concern
that cuts in Gulf of Mexico gas production caused by damage from
Hurricane Ivan would crimp supplies. Daily output from the
region, source of a quarter of U.S. production, was down by 1.78
billion cubic feet at the end of last week, or 14 percent.
Inventories nationwide rose by 81 billion cubic feet last
week, 27 percent more than normal.
``Traders have to wrestle soon with the fact that storage is
so high,'' said Guy Gleichmann, president of UnitedStrategic
Investors Group, a commodity brokerage in Hollywood, Florida.
``Even if they bring all this stuff back online from Ivan, they
don't have anyplace to put it.''
--Editors: Banker.
Story illustration: To graph the front-month Nymex contract, see
{NG1 <Cmdty> GP D <GO>}. For a slide show of natural-gas data,
see {CNP 09101550204 <GO>}. Press the space bar to pause the tour
and <GO> to resume.
To contact the reporter on this story:
Jim Kennett in Houston at (1) (713) 353-4871 or
jkennett@bloomberg.net
To contact the editor of this story:
Robert Dieterich at (1) (212) 893-4485 or
rdieterich@Bloomberg.net.
[TAGINFO]
NGUSHHUB <Index>
NI GAS
NI US
NI CMD
NI NRG
NI GASMARKET
NI TOP
NI NY
NI FUTURES
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#<705506.27849>#
#<580021.910155>#
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