Natural gas futures continue to fall; U.S. oil demand down slightly in 2005 |

Natural gas futures continue to fall; U.S. oil demand down slightly in 2005

WASHINGTON – Natural gas futures fell to a four-month low on Thursday, beaten down for the third consecutive day because of a mild start to winter in the U.S. that has eased traders’ concerns about supplies.The Energy Department reinforced those feelings on Thursday with a report that showed a surprising increase in natural gas inventories last week.Crude-oil and heating-oil futures also declined, though prices in the petroleum complex have been in an uptrend since mid-December and analysts are cautioning that the cost of refined products such as gasoline are likely to rise as the year progresses.”It is difficult to look forward to the first 100 or 200 days of 2006 and not conclude that the year will be reminiscent of 2005 with powerful and pronounced updrafts on prices,” said analyst Tom Kloza of Wall, N.J.-based Oil Price Information Service. Kloza said he would not be surprised to see the average retail price of gasoline in the U.S., now $2.25 a gallon, climb by 75 cents over the next nine months.Among the flurry of data released by the Energy Department was a detail that highlighted one impact of soaring energy prices in 2005: for the first time since 2001, total demand for petroleum and related products declined from the previous year. Energy demand is closely linked to overall economic activity.In its weekly natural gas report, the Energy Department said underground storage of natural gas in the lower 48 states totaled 2.64 trillion cubic feet last week, an increase of 1 billion cubic feet from the prior week that left inventories 3 percent below year ago levels. Analysts had been expecting a small decline in inventories.”It’s very unusual to see a build during the last week in December,” said Man Financial broker Andrew Lebow, who said the nation’s supply of both natural gas and heating oil appeared adequate, assuming normal weather patterns.February natural gas futures slid 69.7 cents to $9.50 per 1,000 cubic feet in afternoon trade on the New York Mercantile Exchange, putting the front-month contract 40 percent below its peak of $15.78 on Dec. 13.Natural gas futures are also below their levels immediately prior to Hurricane Katrina, which knocked out platforms, pipelines and processing plants and sent prices soaring.In a separate report, the Energy Department said commercially available supplies of crude oil declined last week by 1 million barrels to 321.6 million barrels, or 12.5 percent above year ago levels.In spite of rising demand for motor fuel, gasoline stocks grew by 1.4 million barrels to 204.3 million barrels, or 6 percent below year ago levels.Distillate fuel stocks, which include diesel and heating oil, increased by 2.1 million barrels to 128.9 million barrels, or 2 percent above last year. A sharp increase in diesel stocks made up for a half-million barrel decline in heating oil.Light sweet crude for February delivery dropped by 57 cents to $62.85 per barrel, gasoline futures gained 1.80 cent to $1.8025 a gallon and heating oil futures dipped 1.52 cent to $1.8025 a gallon.With the exception of natural gas, Thursday’s drop in prices followed increases in the past week, including a $2 jump in the price of crude on Monday. Analysts said there was no single factor underpinning the early year rally in petroleum futures, but investors seemed to be pouring money into the market out of faith that global demand will keep rising and that the possibility of energy supply disruptions from Iraq, Nigeria – and now Russia – won’t soon fade.Oil futures finished 40 percent higher than they started in 2005, reaching a peak of $70.85 per barrel on Aug. 30 after Katrina.But the high price of energy contributed to a slowdown in U.S. economic growth in 2005 as well as a small drop in overall petroleum demand. Average daily demand for petroleum and related products in the U.S. was 20.67 million barrels per day in 2005, a decline of 0.3 percent from the year before, according to the Energy Department.The nation’s appetite for jet fuel, propane and other oils fell, while demand for gasoline, distillate and fuel oil increased, according to the agency, which is forecasting a slight increase in demand for 2006.Vail, Colorado

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