Gas inventories gained 3 billion cubic feet in the week ended Nov. 12 to an all-time high of 3.843 trillion cubic feet, according to the Energy Department. Gas rallied 9.6 percent last week on forecasts that temperatures will be below-normal in the East and Midwest.
"Going into the heating season, you have adequate supplies, and storage is having a dampening effect in the market," said Cameron Horwitz, an analyst in Houston at Canaccord Genuity. "Cold weather will be one of the factors that can push gas out of a trading range, but we have to see that come to fruition."
Natural gas for December delivery rose 3.4 cents, or 0.8 percent, to $4.198 per million British thermal units at 11:43 a.m. on the New York Mercantile Exchange after advancing as high as $4.242 and dropping to $4.125. Prices have dropped 5.1 percent from a year ago.
Gas failed to break above the intraday high of $4.249 set on Nov. 10, said Carl Neill, an energy consultant at Risk Management Inc. in Atlanta.
"You basically have pretty much all the other markets that are falling, and that may be pressuring gas," he said.
The Standard & Poor's 500 Index declined 0.6 percent to 1,192.91. The Thomson Reuters/Jefferies CRB Index of 19 raw materials dropped 0.6 percent to 297.
Colder Weather
New York will have a low of 33 degrees Fahrenheit (1 Celsius) on Nov. 26, 5 degrees below average, according to AccuWeather Inc. in State College, Pennsylvania. Chicago will have a low of 22 degrees, 8 degrees below normal.
About 52 percent of U.S. households use natural gas for heating, according to the Energy Department.
The U.S. gas rig count declined 19 to 936 in the week ended Nov. 19, the lowest level since March 12, according to Houston- based Baker Hughes. The total was 29 percent higher than a year earlier.
"While not on a decisive downward trend, drilling is showing signs of moderation," said Biliana Pehlivanova, an analyst at Barclays Capital in New York, in a note. "Still, the rig count remains at a level that ensures growth of production, which keeps a lid on the upside potential for prices."
The inventory increase was smaller than the five-year gain of 18 billion cubic feet, Energy Department data showed. A surplus to the five-year average narrowed to 9.3 percent from 9.8 percent.
Gas inventories may total 1.776 trillion cubic feet at the end of the winter heating season in March, up about 114 billion cubic feet from a year earlier, the Energy Department estimated on Nov. 9 in the monthly Short-Term Energy Outlook.
Read more: http://www.sfgate.com/cgi-bin/article.cgi?f=/g/a/2010/11/21/bloomberg1376-LCAHLR6JIJUT01-0UQLHEBC1QNR4J097LVA7D81JV.DTL#ixzz162OEZF6D
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