Natural gas may fall on concern of excess supply

Natural gas futures may fall as inventory declines slow with the end of winter weather and increased drilling indicates that production totals may advance, a Bloomberg News survey showed.

Seven of 19 analysts, or 37 percent, said gas futures on the New York Mercantile Exchange will decline through March 26. Six, or 32 percent, said gas will rise and six others said there would be little change in price. Last week, 50 percent of participants said natural gas would fall.

An Energy Department report yesterday showed that stockpiles declined 11 billion cubic feet last week, below the five-year average drop of 65 billion, as mild weather in much of the U.S. cut consumption. A supply increase of as much as 10 billion cubic feet may be reported next week, according to a report from Martin King, an analyst at FirstEnergy Capital Corp. in Calgary.

"We're pretty much done withdrawing gas from storage at this point," said Cameron Horwitz, an analyst at SunTrust Robinson Humphrey in Houston. "The rig count is rising; supply could be growing."

Gas production may increase this year as the number of rigs searching for the fuel has risen 39 percent from a seven-year low in July, Baker Hughes Inc. data show.

U.S. gas consumption drops off during April, May and June before hot weather arrives to increase demand for electricity from gas-fired power plants to run air conditioners.

The department said stockpiles totaled 1.615 trillion cubic feet, 4.7 percent above the five-year average, with about two weeks to go in the heating season. The surplus widened from 1.2 percent in the previous report.

Gas for April delivery this week declined 23.1 cents, or 5.3 percent, to $4.169 per million British thermal units on the New York Mercantile Exchange. It was the sixth consecutive weekly price decline.

The gas survey has correctly forecast the direction of prices 46 percent of the time since its June 2004 introduction.