Natural gas futures fell the most in three weeks on forecasts of moderating temperatures that may reduce demand for the heating fuel.
Futures declined as temperatures may be normal or higher in the eastern U.S. during the first week of January, according to MDA Federal Inc.’s EarthSat Energy Weather in Rockville, Maryland. Last week, MDA predicted colder-than-normal weather in the mid-Atlantic and Southeast.
“It’s a simple function of people reacting to the weather and thin trading ahead of the holidays,” said Mike Rose, the director of energy trading for Angus Jackson Inc. in Fort Lauderdale, Florida. “The market’s just going to sit around the $4.20 area, give or take 20 cents.”
Natural gas for January delivery fell 17.8 cents, or 4.2 percent, to settle at $4.059 per million British thermal units on the New York Mercantile Exchange. The futures declined the most since Nov. 29. Gas prices have dropped 2.9 percent this month and 27 percent this year.
The low temperature in New York on Jan. 1 may be 33 degrees Fahrenheit (1 Celsius), 6 degrees above normal, according to AccuWeather Inc. in State College, Pennsylvania. The low in Philadelphia may be 32 degrees, 5 degrees above normal.
About 52 percent of U.S. households use natural gas for heating, according to the Energy Department.
Stockpiles Above Average
U.S. gas stockpiles totaled 3.561 trillion cubic feet for the week ended Dec. 10, 9.9 percent above the five-year average and 1 percent below last year’s level. The Energy Department may report a larger-than-average reduction in gas inventories this week because of cold weather last week in the eastern and central U.S., analysts predict.
The department may say Dec. 23 that 180 billion cubic feet of gas were withdrawn from storage during the week ended Dec. 17, according to the median of seven analyst estimates compiled by Bloomberg. The five-year average withdrawal from inventories is 136 billion.
“The market is signaling that supply is not an issue,” said Jay Levine, the president of Enerjay LLC, an energy brokerage in Portland, Maine. “Around $4 is not an unreasonable price for January gas, given the dark clouds of the storage overhang.”
U.S. natural gas production may reach a record high of 62.09 billion cubic feet a day this year, the Energy Department said in its monthly Short-Term Energy Outlook report Dec. 7.
Gas stockpiles will total 1.833 trillion cubic feet at the end of the winter heating season in March, about 171 billion cubic feet higher than at the end of March 2010, the department said in the report.
Wholesale natural gas at the benchmark Henry Hub in Erath, Louisiana, rose 6.02 cents, or 1.5 percent, to $4.1655 per million Btu on the Intercontinental Exchange.
Gas futures volume in electronic trading on the Nymex was 197,026 as of 2:46 p.m., compared with the three-month average of 285,000. Volume was 266,676 yesterday. Open interest was 785,286 contracts, compared with the three-month average of 789,000. The exchange has a one-business-day delay in reporting open interest and full volume data.