US natgas futures fall on smaller than expected draw

28 January 2010 18:32  [Source: ICIS news]

HOUSTON (ICIS news)--Natural gas futures prices continued to fall on Thursday following a report by the US Energy Information Administration (EIA) showing a lower than expected draw in stockpiles last week.

As of 13:22 hours New York time (18:22 hours GMT), the March NYMEX futures contract was trading down by more than 4 cents to $5.178/MMBtu. 

Futures have been sliding since Friday, putting prices in the low $5s/MMBtu for the first time since the beginning of December.

Natural gas prices drive feedstock and power costs for the petrochemical industry.

Industry watchers predicted the natural gas inventory draw at 80bn-135bn cubic feet (bcf), while historic draws during the same time period are normally above 150 bcf. Instead, the EIA statistics showed a 86 bcf draw.

Aggregate storage dipped to 2,521 bcf in the week ended 22 January compared with 2,607 bcf in the previous week.

Above-normal temperatures in the country's largest heating regions kept domestic natural gas demand low versus prior weeks.

"Space heating needs moderated greatly last week; 19% below normal in Chicago and 26% below in New York City," according to energy analyst Stephen Schork, editor of the The Schork Report. "Demand from the power grid plunged by 12.5% to 74,386 gigawatt hours [GWhrs]. It was the lowest amount of electrons transmitted since November."

The week-to-week natural gas demand degradation was more than 10 bcf/day with more than 8 bcf/day of that drop coming from gas-fired power feeding home heating, according to Cameron Horwitz, a natural gas analyst with the investment firm SunTrust Robinson Humphrey. The rest was a drop in industrial use of the fuel.

"You usually don't see those swings in gas-powered generation in the winter," he said.

But a cold snap earlier in the month inflated natural gas demand nationwide.

A continuation of milder weather forecast for the near future will not boost futures; however, it will not force prices below the $5 mark, Horwitz said.

"I think it will stand its ground and stay above $5," he said. "In our opinion, we don't see prices being meaningfully below 5 this year."

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By: Ryan Hickman
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