Natural gas ends lower as high stockpiles weigh on prices

NEW YORK -- Natural gas fell Friday, contributing to a 4.2% decline for the week as high U.S. stockpiles keep pressure on prices.

Analysts and traders said a smaller-than-expected weekly drop in domestic gas inventories, in data released Thursday, contributed to the price declines. Stockpiles fell 194 Bcf last week, below the 205 Bcf decline forecast in a Dow Jones Newswires survey. The data showed that bitter cold temperatures last week failed to drive gas consumption sharply higher, raising concerns about low fuel use through the end of the winter.

"The market was still processing the withdrawal from yesterday, and that's putting some pressure," said Kent Bayazitoglu, an analyst at Gelber & Associates. "There is still a lot of trading on the forecasts right now. We saw some models today that showed warmer temperatures in the middle of February, so that's offering some weakness."

Natural gas for March delivery slumped 3.8 cents, or 1.1%, to settle at $3.301 a million BTU on the New York Mercantile Exchange Friday.

The declines to end Friday's session reversed earlier gains that followed a monthly report showing rising gas consumption in November. The U.S. Energy Information Administration said November gas usage rose 7% from last year to 2.184 trillion cubic feet, the highest ever for the month since the EIA began keeping records in 2001.

Gas demand from the electricity-generating sector rose 6.5%, while residential gas demand rose 12.3%.

The increase in November consumption offered evidence that the rapid supply growth that has weighed on prices for the past three years is beginning to be met with higher use of the fuel. In a separate release Thursday, the EIA said U.S. natural-gas output in the lower 48 U.S. states rose 1.6% in November from a year ago.

The data "suggest there is a much better alignment of production to future consumption," said Richard Hastings, macroeconomic strategist at Global Hunter Securities, in a research note.

Still, the data from November wasn't enough to counteract forecasts for the next few weeks. Commodity Weather Group, a private forecaster, said milder weather is expected to return for the six-to-10 day time period.

About half of U.S. homes are heated with natural gas, and many more use electric heat powered by gas-fired utilities. When temperatures drop in the winter, gas demand typically rises.

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