Natural Gas Tumbles to Six-Week Low on Mild December Weather

Natural gas futures declined to a six-week low in New York on forecasts for moderate temperatures that would curb demand for the heating fuel.

Gas dropped as much as 3.8 percent after Commodity Weather Group LLC in Bethesda, Maryland, predicted normal or warmer- than-normal weather in most of the lower-48 states through Dec. 24. The low in New York on Dec. 15 may be 40 degrees Fahrenheit (4 Celsius), 8 higher than the usual reading, according to AccuWeather Inc. in State College, Pennsylvania.

“The market is under pressure because of the mild weather forecasts and weak seasonal demand,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “It’s starting to look like we’re going to see moderate temperatures until the end of the year.”

Natural gas for January delivery fell 10.6 cents, or 3 percent, to $3.445 per million British thermal units at 1:32 p.m. on the New York Mercantile Exchange. Prices dropped to $3.415 per million Btu, the lowest intraday price since Oct. 29. The futures are up 15 percent this year.

January $3.25 puts were the most active gas options in electronic trading. They were 1.4 cents higher at 3.4 cents on volume of 1,930 contracts as of 1:47 p.m. Puts accounted for 58 percent of options volume.

Hedge funds cut bets on U.S. natural gas by the most in nine months as warmer-than-normal weather curbed heating demand and left a glut of the fuel in storage.

Money managers reduced net-long positions, or wagers on rising prices, by 36 percent in the week ended Dec. 4, according to the Commodity Futures Trading Commission’s Dec. 7 Commitments of Traders report. It was the biggest weekly drop since March.

Weather Implications

“We continue to see intermediate-term risk down to the $3.25 area in the absence of colder temperatures, said Tim Evans, an energy analyst at Citi Futures Perspective in New York, in a note to clients today.

The low temperature in Chicago on Dec. 15 may be 30 degrees Fahrenheit, 7 above normal, according to AccuWeather. About 50 percent of U.S. households use gas for heating, Energy Department data show.

This year will probably overtake 1998 to become the warmest on record in the contiguous U.S. states, the National Oceanic and Atmospheric Administration said in a monthly climate report. The first 11 months were the warmest start to any year since the nation began keeping records in 1895, NOAA’s Climatic Data Center said Dec. 6.

U.S. natural gas output in the lower-48 states rose to a record in September as new wells in the Northeast’s Marcellus shale formation started producing, the Energy Department said.

Gas Output

Production increased 0.6 percent to 73.05 billion cubic feet a day, the highest level in data going back to 2005, the department’s Energy Information Administration said in the monthly EIA-914 report, released Nov. 30 in Washington.

The report covers gas gross withdrawals, which include gas used for repressuring, quantities vented and flared, and non- hydrocarbon gas removed in treating or processing operations.

U.S. gas inventories fell 73 billion cubic feet in the week ended Nov. 30 to 3.804 trillion, erasing a year-over-year surplus for the first time in 2012, according to the Energy Department.

Supplies were 0.9 percent below year-earlier levels and 4.6 percent above the five-year average in the week ended Nov. 30. The surplus to the average has declined from a six-year high of 61 percent in March, department data show.

LNG Permit

Sempra Energy (SRE) said today it filed a permit application with the Federal Energy Regulatory Commission to build a liquefied natural gas export terminal at its existing Cameron LNG site in Louisiana. The company began the pre-filing process in April. Sempra said it may break ground on the project in the fourth quarter of 2013.

The Cameron terminal is awaiting Energy Department approval to export to countries with which the U.S. doesn’t have free- trade agreements. Gas exports would have “net economic benefits” for the U.S., according to a study commissioned by the department and released Dec. 5.

The boom in oil and natural gas production helped the U.S. cut its reliance on imported fuel. America met 83 percent of its energy needs in the first eight months of the year, department data show. If the trend goes on through 2012, it will be the highest level of self-sufficiency since 1991.

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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