U.S. GAS : Futures Fall After Hitting 2012 High
09/28/2012| 10:28am US/Eastern
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--Natural-gas declines Friday after rapid price surge
--Futures recently down 2.8 cents to $3.269
--Analysts say weather outlooks take center-stage
By Jerry A. DiColo
NEW YORK--Natural gas futures aimed lower Friday after surging by more than 40 cents this week as investors paused to weigh the latest gains against the latest weather outlooks.
Natural gas for November delivery fell 2.8 cents, or 0.9%, to recently trade at $3.269 a million British thermal units on the New York Mercantile Exchange after trading as high as $3.317/MMBtu earlier in the session.
Gas prices paused following strong gains over the past week that have pushed futures to the highest level since December. Forecasts have called for cooler-than-normal weather across much of the U.S., which should raise gas-fired heating demand.
But after the latest rally, some investors are concerned that futures have risen too quickly in anticipation of cold weather, said Gene McGillian, a broker and analyst at Tradition Energy.
"Until we see signs of real winter heating demand, this rally will have tougher sledding," he said.
Forecaster WSI Energycast said Friday that most of the U.S. will see cooler-than-normal temperatures over the next 11-to-15 days, with models predicting colder weather than forecast earlier this week.
The autumn months are typically a period of low natural-gas demand, as mild temperatures prompt homes and businesses to shut off their air conditioning.
In this so-called shoulder season, natural-gas injections into U.S. storage rise until cold weather forces consumers to turn on their heating.
More than half of U.S. homes are heated with natural gas, and many more use electric heat powered by gas-fired utilities.
On Thursday, the U.S. Energy Information Administration said stockpiles rose by 80 billion cubic feet, more than the five-year average build for this time of year. But the threat of colder weather trumped concerns about rising stockpiles.
"The market is trading based on a perception of what the upcoming winter may do," said Dominick Chirichella, an analyst at the Energy Management Institute.
Jim Ritterbusch, head of trading advisor Ritterbusch and Associates, said this week's price surge "could run for another 10 cents" above Thursday's settlement, particularly if cooler forecasts persist.
"Going forward, the market will become increasingly reactive to changes in short-term temperature forecasts on virtually a daily basis," he said.
Natural gas for next-day delivery at the benchmark Henry Hub in Louisiana recently traded at $3.06/MMBtu, according to IntercontinentalExchange, compared with Thursday's average of $3.0118/MMBtu. Natural gas for next-day delivery at Transcontinental Zone 6 in New York traded at $3.175/MMBtu, up from $3.1013/MMBtu.
Write to Jerry A. DiColo at jerry.dicolo@dowjones.com
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