WSJ: Natural Gas Falls on Warmer Temperatures Forecast
--Prices erase three-day gain as forecast turns warmer
--November-delivery gas under pressure ahead of Tuesday expiry
--High inventories, weak demand way on market
By David Bird
NEW YORK--Natural-gas futures dropped Monday, erasing much of a 3.5%, three-day gain, amid worries over near-term demand as weather forecasts call for a warming trend across the Midwest and Eastern U.S.
Natural gas for November delivery, ahead of its expiration at Tuesday's settlement, was 2.9%, or 10.9 cents, lower at $3.597 per million British thermal units. The contract rose 12.6 cents in the last three days of last week on forecasts for a short-term blast of below-normal temperatures in the Midwest. Earlier, November gas posted an intraday low of $3.562/mmBtu, off 4% from Friday.
But latest forecasts are tilting toward warmer than normal temperatures in the Midwest -- the region with the biggest number of homes relying on gas heating -- and the densely populated East, driving down demand.
MDA Weather Services said its six-to-10-day outlook shows only a few days of below-normal temperatures for these key demand regions and those will be framed by above-normal temperatures at the start and end of the forecast period. It sees "widespread" above-normal temperatures in the Midwest during the first full week of November.
In the 11-to-15-day outlook, above-normal temperatures are projected to sweep from Texas eastward, blanketing two-thirds of the nation. Midweek temperatures in some areas, like Dallas and Cincinnati, are expected to post double-digit above-normal readings, before slipping barely below normal at the start of November and turning warmer again.
"We are really feeling the ebb and flow of weather outlooks" said Matt Smith, analyst at Schneider Electric in Lexington, Ky.
Concerns over the downturn in demand come as gas inventories are climbing back toward the record level at the start of last winter, amid strong output.
"We are so well supplied here, that these forecasts are really weighing on the market at the start of the week," Mr. Smith said.
At 3.741 trillion cubic feet, current gas inventories are 2.4% below the unusually high year-earlier and 2.1% above the five-year average level for the week ended Oct. 18, the Energy Information Administration said Thursday.
