US natural gas futures fall on low storage pull

04 March 2010 22:20  [Source: ICIS news]

HOUSTON (ICIS news)--US natural gas futures fell hard on Thursday in response to the government's weekly storage report showing a slimmer-than-expected pull from stockpiles last week.

The Energy Information Administration (EIA) reported underground inventories of natural gas fell by 116bn cubic feet (bcf) during the week of 26 February, putting the domestic total at 1,737 bcf.

Market observers had pegged last week's pull between 120 and 155 bcf, as a result of the wave of wintry weather that blew through the US northeast.

The narrow delivery number sent the April NYMEX contract down by 18.2 cents to settle at $4.575/MMBtu. The May contract finished the session at $4.643/MMBtu, shedding 17.9 cents from Wednesday.

"Contribute it completely to the shortfall between expectations of the draw," Pax Saunders, analyst at Gelber and Associates, an energy consulting firm in Houston, said about the price slide.

Saunders said Thursday's report leaves inventories only 1.2% above the five-year average. More importantly, ample production and an uptick in liquified natural gas (LNG) imports kept that number from going negative during the recent cold weather in the US, he said.

LNG imports doubled year over year in January, according to the EIA, as higher prices and frigid temperatures attracted cargoes.

The five-year average includes last year's record-high inventories that skew the average higher, according to Gerry Goobie, an analyst in Calgary with energy consultants Purvin & Gertz.

"You take out last year and then the data shows there is a lot of gas there," Goobie said. "That's really keeping a lid on prices, basically."  

Natural gas prices are an important indicator of chemical commodity price direction, with the industry relying heavily on natural gas as a production feedstock and power fuel.

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By: Ryan Hickman
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