Natural Gas Futures Drop to Three-Week Low on ‘Dark Cloud’ of Fundamentals

Natural gas futures fell to the lowest price in three weeks on forecasts of warmer weather that may limit consumption of the fuel and leave supplies higher than normal as the heating season ends.

Gas slipped 2 percent after private forecaster Commodity Weather Group LLC predicted above-normal temperatures for parts of the eastern and central U.S. next week. Inventories may total 1.572 trillion cubic feet for the week ended April 1, 3 billion above the five-year average, Bloomberg data showed.

“The weather is not supportive of increasing prices, much less sustaining prices, and supply is a huge fundamental weight on the market,” said Jay Levine, president of Enerjay LLC, a Portland, Maine, energy brokerage. “People feel that there’s a dark cloud over natural gas that’s not going to dissipate.”

Natural gas for May delivery fell 8.5 cents to $4.146 per million British thermal units on the New York Mercantile Exchange, the lowest settlement price since March 16. The futures have dropped 5.9 percent this year.

Above-normal temperatures are likely in the Northeast, Southeast and Great Lakes region next week, Commodity Weather Group predicted. Texas, New Mexico and Colorado may also be warmer, according to Matt Rogers, the company’s president.

The low temperature in New York on April 13 may be 46 degrees Fahrenheit (8 Celsius), 2 degrees above normal, according to AccuWeather Inc. in State College, Pennsylvania. The low in Chicago may be 49 degrees, 9 above normal.

About 52 percent of U.S. households use natural gas for heating, according to the Energy Department.

Spring Weather

“The gas market continues to edge lower under pressure from evaporating heating needs due to the onset of spring weather across most of the country,” said Addison Armstrong, Gene McGillian and Chris Dillman, analysts at Tradition Energy in Stamford, Connecticut, in a note to clients today.

Heating demand may be 26 percent below normal from April 12 through April 16, said David Salmon, a meteorologist with Weather Derivatives in Belton, Missouri, in a note to clients today.

The Energy Department may report a withdrawal from gas inventories tomorrow after cold weather in the Northeast last week. Department data may show stockpiles fell by 52 billion cubic feet in the week ended April 1 to 1.572 trillion, according to the median of 21 analyst estimates compiled by Bloomberg. The five-year average change in stored reserves for the week is an increase of 13 billion.

Gas supplies in the week ended March 25 totaled 1.624 trillion cubic feet, 4.4 percent above the five-year average and 0.7 percent below year-earlier levels. Last year, working gas stocks totaled 1.665 trillion cubic feet as of April 1.

Gas futures volume in electronic trading on the Nymex was 262,699 as of 2:36 p.m., compared with the three-month average of 317,000. Volume was 218,965 yesterday. Open interest was 906,245 contracts. The three-month average open interest is 895,000.

The exchange has a one-business-day delay in reporting open interest and full volume data.

To contact the reporter on this story: Christine Buurma in New York at cbuurma1@bloomberg.net;

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net

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