Natural gas futures traded near the lowest price in 10 years as forecasts for mild weather across the eastern U.S. next week signaled demand may fall.
Gas was little changed after tumbling 3.6 percent yesterday, the biggest one-day decline since March 22. Temperatures from the Mississippi River to the East Coast will be normal or above normal from April 15 through April 24, according to MDA EarthSat Weather in Gaithersburg, Maryland. Unusually mild weather and record production have driven gas prices to decade lows.
“Until we start to see signs that production levels are being tapered off or an increase in the seasonal demand factor, the market is going to skim near the 10-year lows,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut.
Natural gas for May delivery rose 0.2 cents to $2.033 per million British thermal units at 11:33 a.m. Singapore time on the New York Mercantile Exchange. Earlier today, it fell to $2.022, the lowest intra-day price since Jan. 29, 2002. Futures closed yesterday at $2.031, the lowest settlement price since January 2002.
Gas, down 32 percent this year, is the worst performer on the Standard & Poor’s GSCI commodity index.
The low temperature in Philadelphia on April 16 will be 60 degrees Fahrenheit (16 degrees Celsius), 16 above normal, according to AccuWeather Inc. in State College, Pennsylvania. St. Louis may see a low of 59 degrees, 15 above normal.
Demand for heat in the U.S. will be 12 percent below normal for the week ending April 17, according to Weather Derivatives. The Belton, Missouri-based forecaster estimated that demand during the winter heating season was 18 percent below normal through April 7.
About 51 percent of U.S. households use gas for heating. Fuel consumption typically slumps after the winter heating season and before rising temperatures drives demand from power plants to run air conditioners.
“Significant cooling demand is still several weeks distant, as well, so selling pressure should continue unabated, at least for the moment,” Michael Fitzpatrick, a partner at the Kilduff Group, an energy advisory firm in New York, said in a client note yesterday. “The current stream of data on storage, production and drilling only reinforces expectations for more downside.”
U.S. marketed-gas output will climb 4.5 percent this year to average 69.22 billion cubic feet a day, after rising 7.9 percent last year, according to the Energy Department’s Short-Term Energy Outlook, released yesterday in Washington. Production will grow at “a much lower rate than in 2011 as prices reduce new drilling plans,” the federal agency said.