Natural Gas Declines Near 6-Month Low on Warm Weather Outlook

Natural gas futures dropped for a fourth day in New York on forecasts of milder-than-average weather that may limit demand for the heating fuel.

Gas slipped as much as 1 percent after WSI Corp. in Andover, Massachusetts, predicted mostly above-normal temperatures in the eastern half of the U.S. from Dec. 16 through Dec. 20. Prices closed at $3.46 per million Btu yesterday, the lowest settlement since Oct. 26.

“December has been a dud so far in terms of heating demand,” said Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York. “I was under the impression that we were going to see colder weather than we had last year. The forecasts so far aren’t very supportive.”

Natural gas for January delivery fell 1.8 cents, or 0.5 percent, to $3.442 per million British thermal units at 9:15 a.m. on the New York Mercantile Exchange. The futures are up 15 percent this year.

The low in New York on Dec. 17 may be 36 degrees Fahrenheit (2 Celsius), 4 more than the usual reading, according to AccuWeather Inc. in State College, Pennsylvania. The low in Chicago on may be 29 degrees Fahrenheit, 7 above normal. About 50 percent of U.S. households use gas for heating, Energy Department data show.

Warmest Year

This year will probably overtake 1998 to become the warmest year on record in the U.S., the National Oceanic and Atmospheric Administration said in a monthly climate report.

The first 11 months were the warmest start to any year in the contiguous states 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.

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 last week 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.

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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