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US GAS Futures End At Lowest Price Since March On Weak US Data

August 26th, 2010

(Dow Jones) – Natural gas futures slid to their lowest levels since March, falling more than 4% Wednesday on weak U.S. economic data and a calm weather outlook for offshore production areas.

Natural gas for September delivery settled down 16.8 cents, or 4.16%, at $3.871 a million British thermal units on the New York Mercantile Exchange, the lowest settlement price since March 31. The benchmark contract ended the day lower for the sixth consecutive session.

Weaker-than-expected reports Wednesday on the U.S. manufacturing and housing sectors added to growing concern about the strength of the broader economy. Data for July orders for manufactured durable goods came in well below analysts’ expectations, and new home sales last month fell to their lowest level since the government began tracking them in 1963.

Traders and analysts have paid close attention to economic data for signs that gains in industrial production would revive recession-weakened gas demand. Industrial users represent about a third of domestic gas consumption.

“I think the data resonated in the gas market,” said Pax Saunders, an analyst with Gelber & Associates in Houston. “It’s a bad bellwether for the general economy and energy demand.”

Natural gas prices are down more than 20% so far this month, pressured by a deteriorating economic outlook and the coming seasonal lull in gas use. Demand typically eases going into the fall, as cooler temperatures reduce the need for gas-fired power plants to keep up with air conditioning demand.

“Natural gas traders already seem to have discounted the end of summer,” Peter Beutel, president of New Canaan, Conn.-based energy advisory firm Cameron Hanover, wrote in a note to clients.

Although government and private forecasters are predicting an unusually active Atlantic hurricane season, storms haven’t had a major impact on U.S. energy production so far. Storm activity can threaten gas supplies from the U.S. Gulf of Mexico, an energy-rich region representing about 11% of domestic gas output.

The National Hurricane Center said Wednesday that Hurricane Danielle, located about 710 miles east of the Lesser Antilles, should continue to move northwest, away from the Gulf of Mexico, and wasn’t expected to make landfall.

The federal Energy Information Administration is expected to report Thursday that U.S. gas storage increased by 38 billion cubic feet during the week ended Aug. 20, according to a Dow Jones Newswires survey of analysts. That would be a smaller-than-average build in gas inventories as hot weather last week spurred additional gas demand.

The EIA is scheduled to release its storage data Thursday at 10:30 a.m. EDT.

FUTURES                   SETTLEMENT                   NET CHANGE
Nymex Sep                     $3.871                                   -16.8c
Nymex Oct                     $3.896                                   -16.3c
Nymex Nov                      $4.132                                   -11.7c

CASH HUB                   RANGE                   PREVIOUS DAY
Henry Hub                   $3.87-$4.02               $4.01-$4.09
Transco 65                   $3.91-$4.00               $4.02-$4.07
Tex East M3                 $4.15-$4.28                $4.27-$4.37
Transco Z6                   $4.18-$4.27                $4.30-$4.36
SoCal                           $3.64-$3.74                $3.60-$3.72
El Paso Perm               $3.60-$3.69               $3.62-$3.72
El Paso SJ                    $3.48-$3.58                $3.44-$3.59
Waha                           $3.65-$3.76                $3.75-$3.80
Katy                             $3.92-$4.03                $4.00-$4.05

_____

By Matt Day

Glossary Terms

Glossary Terms

Nominated Volume

The physical quantity of gas requested, typically in MMBtu/day, for a specific contract or for all contracts at a specific point.

Marketing Affiliate

A marketing company that has corporate ties to an interstate pipeline, an intrastate pipeline, or a local distribution company.

Energy Only Providers

Power marketers or other electricity vendors who provide and bill for only the energy component of the electricity consumed by the end-use customer.

Therm

A unit of heating value equivalent to 100,000 British thermal units (Btu).

Real Power

The component of electric power that performs work, typically measured in kilowatts (kW) or megawatts (MW)--sometimes referred to as Active Power.

Injection (Storage)

The process of delivering natural gas into a storage field for future delivery and use.

Price Ceiling

Statutory maximum lawful prices for various categories of natural gas, including gas destined for both the intrastate and interstate markets.

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