Natural Gas Futures Decline on Outlook for Moderate Temperatures

Natural gas futures in New York slid for the second time in three days on speculation that temperatures won’t be low enough to erase a surplus of the fuel in storage.

Gas dropped as much as 1.1 percent after MDA Weather Services in Gaithersburg, Maryland, predicted mostly normal weather in the eastern half of the U.S. from Dec. 26 through Jan. 4. The low in New York on Dec. 30 may be 29 degrees Fahrenheit (2 Celsius), 1 higher than usual, according to AccuWeather Inc. in State College, Pennsylvania.

“There’s downside risk if the weather forecasts continue to moderate,” said Tom Saal, senior vice president of energy trading at INTL Hencorp Futures LLC in Miami. “We still have ample supplies in inventory by historical standards.”

Natural gas for January delivery fell 1.8 cents, or 0.5 percent, to $3.444 per million British thermal units at 10:33 a.m. on the New York Mercantile Exchange. The futures are up 15 percent this year, heading for the first annual gain since 2007. Prices have risen 3.9 percent this week, approaching the first weekly increase since Nov. 23.

Gas declined to $3.261 per million Btu in intraday trading on Dec. 14, the lowest since Sept. 28.

This year will probably overtake 1998 to become the warmest year on record in the U.S., according to the National Oceanic and Atmospheric Administration.

Warm Year

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.

An Energy Department report yesterday showed inventories dropped 82 billion cubic feet in the week ended Dec. 14 to 3.724 trillion. The stockpile decrease was smaller than the five-year average decline for the week of 144 billion cubic feet, department data show.

Supplies are 10.2 percent above the five-year average, compared with 8 percent for the previous period. The gas inventory surplus to the average has slipped from a six-year high of 61 percent in March, department data show.

The U.S. raised its forecast for natural gas output in 2012 by 0.6 percent in a report Dec. 11.

Marketed gas production will average 69.22 billion cubic feet a day this year, up from 68.84 billion estimated in November, the Energy Department said in its monthly Short-Term Energy Outlook. Output may increase 0.5 percent in 2013 to 69.59 billion a day, department estimates show.

Gas prices at the benchmark Henry Hub in Erath, Louisiana, will average $2.78 per million British thermal units, compared with the previous estimate of $2.77, according to the report from the department’s Energy Information Administration.

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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