--Inventory build of 32 billion cubic feet expected
--Lingering warm weather in eastern U.S. hits demand
--Futures below $4/mmBtu level until October 2012
By David Bird Of DOW JONES NEWSWIRES NEW YORK (Dow Jones)--Natural-gas futures settled 2.5% lower Wednesday amid continued worries over rising inventories and weak demand.
Weekly gas inventory data, due Thursday, are expected to show stocks rose by higher-than-normal levels, to top the vital 3.8-trillion-cubic-feet level. The Energy Information Administration report, scheduled for 10:30 a.m. EST, will show a inventory rise of 32 billion cubic feet in the week ended Nov. 4, according to analysts surveyed by Dow Jones Newswires.
That would top last year's increase of 26 bcf and the five-year average rise of 23 bcf. If the forecast is correct, stocks of 3.826 trillion cubic feet would stand just 0.3% below a year ago and top the five-year average by 5.8%.
Kyle Cooper, managing partner at IAF Energy Advisors in Houston, said he expected a "huge" 35-billion-cubic-feet rise. "That's large number for this time of year," he said.
Rising inventory and continued weak demand, in part due to forecasts for lingering above-normal temperatures through the third week of November in the eastern half of the nation, continue to batter prices.
Natural gas futures for December delivery on the New York Mercantile Exchange settled 9.3 cents, or 2.5%, lower, at $3.652 per million British thermal units. The December contract is 27.1 cents, or 6.9%, below its settlement on Oct. 28, when it began trading as the front-month contract.
"If we don't start getting cold weather, it's going to really get sloppy," Cooper said, adding he sees the possibility for gas to slump to the low $3/mmBtu range, last seen in September 2009. In late October, winter-month futures were trading slightly above $4. But at Wednesday's settlement, futures prices didn't top the $4 mark until the October 2012 contract.
Near-term oversupply worries won't fade quickly, the EIA said in its short-term energy outlook released Tuesday.
The EIA's consumption estimates for fourth-quarter gas demand were revised downward to 69.88 billion cubic feet a day from 70.86 billion cubic feet a day, but were 1.3% above a year ago. The EIA also projects a 12% smaller drop in gas inventories this winter compared with a year ago. End-winter gas inventories are expected to hit a record above 1.8 trillion cubic feet at the end of March, up 14% from a year ago.