Natural gas futures plunge to 3-month low on warm January weather

Natural gas futures fell more than 3% on Wednesday to trade at a three-month low, as forecasts showing warmer-than-normal weather across most parts of the U.S. in January weighed on sentiment.

Natural gas prices have closely tracked weather forecasts in recent weeks, as traders try to gauge the impact of shifting forecasts on winter heating demand.

On the New York Mercantile Exchange, natural gas futures for delivery in February traded at USD3.228 per million British thermal units during U.S. morning trade, down 3.65% on the day.

It earlier fell by as much as 4.5% to trade at a session low of USD3.190 per million British thermal units, the weakest level since September 26.

Updated weather forecasts released Tuesday showed that warmer-than-normal weather was expected across key parts of the U.S. during the first two weeks of January, dampening sentiment on the heating fuel.

The U.S. National Weather Service’s six-to-10 outlook called for above-normal temperatures for a little more than the eastern half of the nation, with below-normal readings in the West.

Bearish speculators are betting on the mild weather reducing winter demand for the heating fuel. The heating season from November through March is the peak demand period for U.S. gas consumption.

Meanwhile, investors remained concerned over bloated U.S. inventory levels. Total U.S. natural gas stockpiles stood at 3.652 trillion cubic feet as of last week, 2.5% higher than last year at this time and 13% above the five-year average.

Early withdrawal estimates for this week’s storage data range from 100 billion cubic feet to 141 billion cubic feet.

Inventories fell by 77 billion cubic feet in the same week a year earlier, while the five-year average change for the week is a decline of 111 billion cubic feet.

The EIA report will be released on Friday, a day later than usual due to the New Year holiday.

Elsewhere on the NYMEX, light sweet crude oil futures for delivery in February rallied 1.85% to trade at USD93.51 a barrel, while heating oil for February delivery rose 0.85% to trade at USD3.056 per gallon.

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World Oil | January 2011

David Shakhovskoy, Geodynamics; Aaron Dick, Gary Carter and Martin Jacobs, Baker Hughes

When drilling into oil, gas and geothermal reservoirs located in deep and/or geologically active areas, high temperatures place great demands on the thermal performance of drilling systems. Additionally, the lithologies drilled to gain access to these reservoirs are often hard rock, requiring the use of roller-cone drill bits. Conventional rubber seal components used in roller- cone drill bits are typically rated for temperatures up to 150°C (302°F), and become thermally degraded—leading to bearing failure—when subjected to higher temperatures than these.

To make a roller-cone drill bit capable of operating at higher downhole temperatures, new rubber compounds were developed and tested in laboratory experiments to characterize their high-temperature behavior. Then, drill bits containing these rubber compounds were used to drill the 8½-in.-diameter vertical well section of a geothermal well in the Cooper Basin of South Australia. Maximum bottomhole circulating temperatures were estimated to be 170°C

(338°F) while drilling the granite basement below 3,500 m (11,500 ft); however, temperature indicators showed that the bits were exposed to temperatures greater than 260°C (500°F).

Seventeen drill bits were used: 14 containing mechanical face seals and high-temperature-rated rubber components and three containing mechanical face seals and conventional rubber components. Filtered run data demonstrated that the bits with high-temperature rubber ran for a 62% greater duration and drilled 27% longer intervals than the bits containing conventional rubber components, although changes in formation temperature and borehole deviation may have skewed the results. Post-drill examination of the high-temperature rubber components found them pliable and resilient, suggesting that they were still functional.

The improved performance of the high-temperature rubber components extends the advantages of mechanical seals in high-temperature roller-cone drilling applications. Longer runs and the resultant greater footage drilled positively impact the well installation costs that consume between 42% and 95% of capital expenditures for a typical geothermal power facility.

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