BLBG:Natural Gas Drops Sixth Day on Forecasts for Warmer U.S. Weather
U.S. natural gas futures fell for a sixth day after the biggest loss in more than three months on speculation that above-normal February temperatures will reduce heating demand and exacerbate a supply surplus.
Gas slid as much as 0.9 percent after dropping 4.5 percent yesterday in New York, the largest decline since Oct. 22, as Commodity Weather Group LLC predicted warmer-than-usual weather in the eastern half of the U.S. next month. Prices rose to a six-week high Jan. 18 amid forecasts for falling temperatures. Gas may decline in the U.S. spring amid “persistently high” stockpiles, Bank of America Corp. said in a report yesterday.
“We still have a lot of supply and not enough winter,” Stephen Schork, the president of Schork Group Inc. in Villanova, Pennsylvania, said today. “The market got ahead of itself a few weeks ago on the assumption that demand was stronger than it actually is.”
Natural gas for February delivery fell as much as 2.8 cents to $3.261 per million British thermal units in electronic trading on the New York Mercantile Exchange and was at $3.261 at 12:32 a.m. in Singapore. The contract slid 15.5 cents yesterday to $3.289, the lowest close since Jan. 10. Futures have slipped 2.6 percent this month. Trading volume for all contracts was 62 percent below the 100-day average.
Commodity Weather Group forecast warmer-than-normal weather in the eastern U.S. from Feb. 7 through Feb. 11. The Feb. 9 low in New York may be 39 degrees Fahrenheit (4 degrees Celsius), 11 more than average, according to AccuWeather Inc. The low in Cleveland may be 33 degrees, 8 higher than normal. About 50 percent of U.S. households use gas for heating.
Revised Forecasts
“The revised forecasts came in warmer and that’s putting some pressure on the market,” Tom Doremus, an analyst at Tradition Energy in Stamford, Connecticut, said yesterday. “We’re seeing some near-term relief from last week’s cold.”
U.S. gas inventories totaled 2.996 trillion cubic feet in the week ended Jan. 18, according to the Energy Information Administration, an arm of the Energy Department. Supplies were 12 percent above the five-year average.
Gas output in the lower-48 states rose to an all-time high in October as more of the fuel was pumped from shale formations in the Northeast and North Dakota, the EIA said Jan. 7. Gross production increased 0.4 percent to 73.54 billion cubic feet a day from a revised 73.22 billion in September, the administration said in the monthly EIA-914 report.
Spring Decline
Output rose to an all-time high of 28.5 trillion cubic feet in 2011, led by record supply from shale deposits, the EIA said in a separate report Jan. 7. Shale accounted for 30 percent of total production in 2011, up from 22 percent the previous year.
The boom in oil and natural gas production helped the U.S. cut its reliance on imported fuel. America met 84 percent of its energy needs in the first 10 months of last year, government data show. If the trend lasted through 2012, it will be the highest level of self-sufficiency since 1991.
Gas prices may fall to $3 per million Btu after the U.S. winter to spur power demand and reduce supplies, according to Bank of America.
“We expect future rallies to be short-lived as fundamentals are not constructive yet,” Sabine Schels, an analyst at Bank of America Corp. in London, said in the note. “Inventories will likely enter the injection season at almost 2 trillion cubic feet, the second-highest level ever.”
To contact the reporter on this story: Yee Kai Pin in Singapore at kyee13@bloomberg.net
To contact the editor responsible for this story: Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net
