Fewer draws cause natural gas drop

Wholesale natural gas prices tumbled 8 percent Thursday, the biggest drop in five weeks, after the U.S. Energy Department reported a smaller-than-expected drop in inventories and said a decline reported last week was too large.

Mild weather cut heating demand, limiting withdrawals from storage in the week ended Nov. 26 to 5 billion cubic feet, the report showed. Supplies fell an average 41 billion cubic feet for the week over the previous five years. The revision to the previous week's data showed a drop of 17 billion cubic feet instead of the 49 billion first reported.

"There was some milder weather this past week," said Marshall Steeves, an analyst at Refco Group Inc. in New York. "We're still well up on the past year, well up on the five-year average."

Gas for January delivery fell 60.2 cents, or 8.1 percent, to $6.811 per million British thermal units on the New York Mercantile Exchange. It was the biggest one-day decline for gas since Oct. 27. The January contract is down 21 percent for the week.

Heating demand last week was 13 percent below normal, according to figures weighted for gas-furnace use from the National Oceanic and Atmospheric Administration. U.S. electricity generation was 0.6 percent lower than last year as of Nov. 26, and 2.5 percent lower than the previous week, according to a weekly report from the Edison Electric Institute.

In Thursday's report, the department reduced the stockpile decline in the week ended Nov. 19 to 17 billion cubic feet as "one or more respondents" revised data. Storage information and the names of respondents are kept confidential, said Bill Trapmann, senior gas analyst at the Energy Department's Energy Information Administration.

"That's a huge mess when they misreport that storage number because it has a huge impact on the market," said John Woodham, director of gas trading at AES Odyssey Group, a unit of AES Corp. in Arlington, Va.

Gas for January delivery on the New York Mercantile Exchange soared $1.018 to $8.639 per million British thermal units in the hours following the report last week. Analysts surveyed by Bloomberg had expected a decline of 13 billion cubic feet.

Peter Huntsman, chief executive of Salt Lake-based Huntsman companies, criticized the New York Mercantile Exchange for not having meaningful trading limits in place that would have prevented last week's price run-up.