US Future Natural Gas Drop as Forecast Inventory Decline

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US natural gas futures dropped for the first time in three days in New York after a government report showed that U.S. stockpiles fell less than expected last week.

Futures declined as much as 2.8 percent after the Energy Department reported inventories slipped 6 billion cubic feet in the week ended March 18 to 1.612 trillion cubic feet. Analyst estimates compiled by Bloomberg and a separate survey of Bloomberg users each predicted a decrease of 8 billion.

“Given the run-up we’ve had this week, we’re seeing a release of some of that buying pressure,” said Kent Bayazitoglu, an analyst with Gelber & Associates in Houston. “We expected prices to fall off after the storage report if the number was within expectations.”

Natural gas for April delivery fell 9.1 cents, or 2.1 percent, to settle at $4.244 per million British thermal units on the New York Mercantile Exchange, the biggest one-day drop since March 10. The futures have declined 3.7 percent this year and are up 1.8 percent this week.

Gas had climbed above the upper Bollinger band, signaling prices would fall, said Peter Beutel, the president of Cameron Hanover Inc. in New Canaan, Connecticut, in a note to clients today. Some traders use Bollinger bands, developed by technical analyst John Bollinger, to judge support and resistance levels based on moving averages.

The stockpile decrease was smaller than the five-year average withdrawal for the week of 17 billion cubic feet, department data show. A surplus to the five-year average rose to 2.2 percent from 1.4 percent the previous week. A surplus to year-earlier supplies was erased, leaving a 0.7 percent deficit.

Gas inventories have been above the five-year average since the week ended March 4.
Weather Outlook

Normal or above-normal temperatures are likely across most of the continental U.S. from April 3 through April 7, according to Commodity Weather Group LLC in Bethesda, Maryland. The mild weather may reduce demand for the heating fuel.

The low temperature in New York on April 4 may be 44 degrees Fahrenheit (7 Celsius), 4 above normal, according to AccuWeather Inc. in State College, Pennsylvania. The low in Chicago may be 40 degrees Fahrenheit, also 4 above normal.

Heating demand in the Northeast may be 6 percent below normal on March 31, David Salmon, a meteorologist with Weather Derivatives in Belton, Missouri, said in a note to clients today.

About 52 percent of U.S. households use natural gas for heating, according to the Energy Department.
Factory Demand

Orders for durable, or long-lasting, goods unexpectedly fell in February, raising concern over the sustainability of the rebound in U.S. business investment. Gas traders monitor economic data to determine whether an acceleration in the recovery may boost industrial demand for the fuel.

Bookings for goods meant to last at least three years dropped 0.9 percent after a 3.6 percent gain the prior month that was larger than initially reported, the Commerce Department said today in Washington.

Gas futures volume in electronic trading on the Nymex was 360,118 as of 2:38 p.m., compared with the three-month average of 305,000. Volume was 360,602 yesterday. Open interest was 893,452 contracts. The three-month average open interest is 878,000.