US GAS: Futures Hit 3-Month Lows After Storage Report

NEW YORK (Dow Jones)--Natural gas futures Thursday fell to their lowest levels since November after a larger-than-average weekly inventory decline wasn't enough to support a market focused on mild weather forecasts and the coming seasonal decline in gas-heating needs.

Natural gas for March delivery recently traded 6.8 cents lower, or 1.7%, at $3.853 a million British thermal units on the New York Mercantile Exchange. The benchmark futures contract fell as low as $3.825/MMBtu after the report, the lowest intraday price since Nov. 17.

The Energy Information Administration reported that U.S. gas stockpiles fell by 233 billion cubic feet last week, near estimates in a Dow Jones Newswires survey for a decline of 234 bcf.

Inventories as of Feb. 11 stood at 1.911 trillion cubic feet, 6.3% below the five-year average, and 6.9% lower than year-earlier levels. Last week's draw was larger than both the 150 bcf five-year average withdrawal and last year's 190-bcf draw.

Inventories stood at a record high at nearly 10% above the five-year average in November, but frigid weather since has eliminated the surplus. The more balanced supply-and-demand picture hasn't done much to support the market, however, with traders instead looking to the coming end of winter's high heating demand period.

The draw was "in line with market expectations," said Tim Evans, an analyst with Citi Futures Perspective. The lack of a surprise "was enough to keep the market pointed lower and focused, at least for now, on current warmer than normal temperatures," Evans added.

Warmer-than-normal weather should last through this weekend across major gas-heating markets in the eastern two-thirds of the U.S., meteorologists with MDA EarthSat said Thursday. The private forecaster sees warmth in the Southeast and Gulf Coast states Feb. 22-26, with colder-than-normal temperatures in the West. The same general pattern should hold through the first days of March.

The gas market remains under pressure from the view that supply growth will outpace demand increases in 2011 amid rising production from shale rock formations, and traders have kept a close eye on the weather outlook for hints at likely U.S. consumption trends.

After plunging by more than 9% last week on forecasts for mild weather toward the end of February, prices this week have shown little direction amid largely unchanged forecasts.

(Source: http://online.wsj.com)