Natural gas futures fell to a one-month low in New York on forecasts that the blast of cold air boosting demand across the U.S. will be followed by milder weather.
Gas slid 1.9 percent as government midday weather models showed above-normal temperatures across most of the lower 48 states next week, according to Frontier Weather Inc. Prices rose earlier as analysts estimates showed an above-average supply decline last week as temperatures dropped.
“You are still seeing that relatively warm development next week, and the following week you are not seeing a pronounced cold come back to the market,” said Teri Viswanath, director of commodities strategy at BNP Paribas SA in New York.
Natural gas for February delivery fell 8.3 cents to $4.216 per million British thermal units on the New York Mercantile Exchange, the lowest settlement price since Dec. 6. Trading volume was 0.5 percent below the 100-day average at 2:48 p.m. Prices are up 31 percent from a year ago.
The premium of February to March futures rose 0.9 cent to 4.1 cents. March gas traded 11.8 cents above the April contract, unchanged from yesterday.
May $7 calls were the most active options in electronic trading. They were up 0.1 cent at 0.2 cents per million Btu on volume of 5,898 at 3:12 p.m. Calls accounted for 70 percent of trading volume.
Gas prices have jumped 20 percent since Nov. 1 as waves of frigid weather moved across the lower 48 states.
Yesterday was the coldest day of the 21st century in the contiguous U.S., based on natural gas-weighted heating-degree days, a measure of energy demand, said Matt Rogers, president of Commodity Weather Group LLC in Bethesda, Maryland.
The low in Chicago yesterday was minus 11 degrees Fahrenheit (minus 24 Celsius), 29 below normal, while Manhattan fell to 4 degrees, 23 lower than average, according to AccuWeather Inc. in State College, Pennsylvania.
Milder weather will push eastern U.S. temperatures to seasonal readings over the next five days and then higher from Jan. 13 through Jan. 17, according to Commodity Weather. Seasonal weather will return from Jan. 18 through Jan. 22.
“There wasn’t a whole lot of change” from the overnight projections in the Global Forecast System model run midday, said Jim Southard, meteorologist with Frontier Weather in Tulsa, Oklahoma.
The highs in New York will swing between the low 50s and mid-20s over the next two weeks, AccuWeather’s website showed.
About 49 percent of U.S. households use gas for heating, according to the Energy Information Administration, the Energy Department’s statistical arm.
An EIA report tomorrow will probably show supplies fell 152 billion cubic feet last week, based on the median of 15 analyst estimates compiled by Bloomberg. Declines were predicted in a range of 137 billion to 185 billion. The five-year average drop is 131 billion.
Gas inventories totaled 2.974 trillion cubic feet in the week ended Dec. 27, 8.9 percent below the five-year average for the period, EIA data show.
“The analyst community is actively discussing the possibility of a 300 bcf withdrawal” for the following week’s report, based on this week’s weather, Viswanath said. A stockpile drop that size would topple the record decline of 285 billion reported for the week ended Dec. 13.
Gas production shut in by the frigid weather this week jumped to 3 billion cubic feet a day from 1.5 billion reported early yesterday, based on wellhead production from the Northeast to the Rockies, Luke Larsen, an analyst at LCI Energy Insight, an energy analysis and consulting company in El Paso, Texas, said in an e-mail.
The U.S. cut its forecast for gas inventories at the end of March, when they bottom out at the end of the peak-demand heating season, by 200 billion cubic feet to 1.5 trillion, Adam Sieminski, administrator of the EIA, said in an e-mailed statement, yesterday. He attributed the revision to “a cold December and several large weekly withdrawals.”
The EIA raised its 2014 gas production estimate 0.3 percent to 71.66 billion cubic feet a day, according to the monthly Short-Term Energy Outlook, released yesterday. Daily output will climb 2.1 percent from last year’s record of 70.21 billion.
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