U.S. supplies probably rose 85 billion cubic feet last week, the median estimate of 19 analysts surveyed by Bloomberg. That would lift stored reserves to 3.26 trillion, more than the highest level reached last year, with seven weeks left until the Nov. 1 end of the refill season. The Energy Department releases its weekly gas-storage report tomorrow.
``Considering where we are with supply, it's going to be difficult for prices to come off this level,'' said Brad Florer, a trader with Kottke Associates in Louisville, Kentucky. ``There's no weather out there and there haven't been any severe storms this hurricane season.''
Gas for October delivery fell 29.6 cents, or 6.5 percent, to $4.23 per million British thermal units at 12:54 a.m. on the New York Mercantile Exchange. The contract touched $4.08 earlier today, the lowest price for a contract closest to expiration since Nov. 18, 2002.
November gas dropped 20.1 cents, or 3.5 percent, to $5.604 per million Btu. November becomes the front-month contract after October expires at the close of floor trading today.
Temperatures in the Midwest will be about 8 degrees Fahrenheit (5 Celsius) below normal Sept. 29 through Oct. 2, according to MDA Federal's EarthSat Energy forecaster. U.S. heating demand in the West will be on average 2 percent below normal through Oct. 4 on above-normal temperatures, researcher Weather Derivatives said.
Amaranth Pressure
The collapse of Amaranth Advisors LLC's natural-gas trades that led to $6 billion in losses may be pushing prices down as some traders bet against institutions that still hold large gas positions, said Charlie Sanchez, energy markets manager for Gelber & Associates in Houston.
``There's a lot of selling pressure against the news on Amaranth, people think they can squeeze out anyone who is stuck in the market,'' Sanchez said. ``Once October comes off the board, some of the institutions may come out of the market.''
Amaranth, based in Greenwich, Connecticut, last week sold its energy trades and other investments to avoid being shut down by creditors after its two main funds plunged 65 percent since the end of August. The firm has been in talks to sell a stake to Citigroup Inc., the largest U.S. bank, which wants to expand its hedge-fund business. It's the largest hedge fund to be crippled by bad bets since Long-Term Capital Management LP in 1998.
Industrial Demand
Orders placed with U.S. factories for durable goods unexpectedly dropped in August after falling in July, a Commerce Department report today showed. The 0.5 percent decline in orders followed a 2.7 percent drop in July, making the first back-to- back drop since April-May 2004.
Slowing factory demand can also decrease demand for gas, which supplies 32 percent of the energy used to run U.S. industrial plants, according to the Energy Department. The decrease in orders is bearish for growth, Jason Schenker, an economist with Wachovia Corp. in Charlotte, North Carolina, said in a note.
``Durable goods orders are indicative of business investment and industrial growth in the pipeline for a number of months to come,'' Schenker wrote. ``A significant slump in August supports our GDP forecasts for below-trend growth in coming quarters.''
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