Natural Gas Futures Decline on Outlook for Rising Production

2011-6-2

Natural gas futures dropped for the first time in three days on speculation that rising production will overwhelm demand for the power-plant fuel.

Gas futures declined 0.8 percent on an Energy Department report yesterday that showed U.S. natural gas production rose 3.3 percent in March to a record as onshore output climbed. Production advanced to 77.83 billion cubic feet a day from a revised 75.33 billion in February, the department said in a monthly report known as EIA-914.

“When we get some production numbers like we saw, that doesn’t help prices,” said Brad Florer, a trader at Kottke Associates LLC, an energy trading company in Louisville, Kentucky. “We’re at the top of the trading range we’ve been in for some time, and it’s getting difficult for the bulls to hang onto the momentum.”

Natural gas for July delivery fell 3.7 cents to settle at $4.629 per million British thermal units at 2:52 p.m. on the New York Mercantile Exchange. Prices have gained 5.1 percent this year.

Gas futures’ Relative Strength Index touched 65.126 yesterday, the highest since May 3, according to Bloomberg data. Some technical analysts use the index to track how rapidly prices gain or retreat. A reading above 70 suggests prices may fall.

The EIA-914 report covers gas gross withdrawals, which include gas used for repressuring, quantities vented and flared, and non-hydrocarbon gas removed in treating or processing operations.

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