Natural gas futures in New York tumbled the most in eight months as meteorologists predicted a period of warmer weather after this week’s arctic chill.
Gas slid below $4 for the first time since Dec. 5 as WSI Corp. in Andover, Massachusetts, said temperatures may be mostly normal or higher than average in the contiguous U.S. from Jan. 14 through Jan. 18. Jan. 7 was the coldest day of the 21st century in the lower-48 states, based on a measure of energy demand, according to Commodity Weather Group LLC. A government report today showed a bigger-than-average stockpile drop for last week.
“We had some terrifically cold weather and the market was strong, but the weather is obviously changing,” said Tom Saal, senior vice president of energy trading at FCStone Latin America LLC in Miami. “Gas is going to follow the forecasts.”
Natural gas for February delivery fell 21.1 cents, or 5 percent, to $4.005 per million British thermal units on the New York Mercantile Exchange, the lowest settlement since Dec. 4 and biggest drop since May 2. Trading volume was 55 percent above the 100-day average at 2:39 p.m. Prices are up 29 percent from a year ago. The futures slumped to $3.999 in intraday trading.
The premium of February to March futures slipped 1.8 cents to 2.3 cents. March gas traded 8.5 cents above the April contract, compared with 11.8 cents yesterday.
February $4 puts were the most active options in electronic trading. They were 6.2 cents higher at 10.1 cents per million Btu on volume of 1,729 at 2:47 p.m. Puts accounted for 46 percent of trading volume.
The low in New York on Jan. 14 may be 37 degrees Fahrenheit (3 Celsius), 10 more than average, according to AccuWeather Inc. in State College, Pennsylvania. Chicago temperatures may fall to 18 degrees Fahrenheit, matching the normal reading for the day.
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 today showed stockpiles fell 157 billion cubic feet in the seven days ended Jan. 3, compared with the five-year average drop of 131 billion for the week. Inventories tumbled by 191 billion in the same period last year. Analyst estimates compiled by Bloomberg had predicted a decrease of 152 billion.
Stockpiles totaled 2.817 trillion cubic feet, 10.1 percent below the five-year average and 15.8 percent less than last year’s supplies for the week, EIA data show.
“This report doesn’t matter,” said Stephen Schork, president of the Schork Group Inc. energy consulting company in Villanova, Pennsylvania. “When you look at the seasonal history of this week’s data, it tends to have the widest variance because it incorporates the holidays. The weather is beginning to moderate and the market is stalling.”
Traders are looking ahead to next week’s report, which may show a “monster” withdrawal, Schork said. The decrease may be the largest weekly drop on record, exceeding a decline of 285 billion cubic feet in the week ended Dec. 13, he said.
The U.S. cut its forecast for gas inventories at the end of March, when they bottom out after the heating season, by 200 billion cubic feet to 1.5 trillion, Adam Sieminski, administrator of the EIA, said in an e-mailed statement Jan. 7. He attributed the revision to “a cold December and several large weekly withdrawals.”
The agency raised its estimate for 2014 marketed gas production to 71.66 billion cubic feet a day from last month’s forecast of 71.43 billion, according to the Jan. 7 Short-Term Energy Outlook. Supplies may rise 2.1 percent from last year’s total.
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