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Natural Gas Slips for Second Day on Forecasts of Mild Weather

Jan. 8 (Bloomberg) -- Natural gas futures declined for a second day in New York on forecasts of milder weather that would reduce demand for the heating fuel.

Gas slid as much as 1.7 percent after Commodity Weather Group LLC in Bethesda, Maryland, said below-normal temperatures would be confined to the northern tier of the U.S. from Jan. 18 through Jan. 22. Earlier forecasts had shown colder-than-usual weather throughout the central U.S. Gas inventories totaled 3.517 trillion as of Dec. 28, a record for that time of year.

“Reduced heating demand from warm weather and still-record storage levels are bringing sellers into the market,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “The weather is the primary driver.”

Natural gas for February delivery fell 3.4 cents, or 1 percent, to $3.232 per million British thermal units at 9:29 a.m. on the New York Mercantile Exchange. Trading volume was 26 percent below the 100-day average. Futures tumbled to $3.05 per million Btu on Jan. 2, the lowest intraday price since Sept. 26. Gas is up 5.6 percent from a year ago.

The futures have dropped 18 percent since rising to a one-year intraday high of $3.933 on Nov. 23.

The low in St. Louis on Jan. 20 may be 24 degrees Fahrenheit (minus 4 Celsius), 2 above normal, according to AccuWeather Inc. in State College, Pennsylvania. The low in Philadelphia may be 25 degrees, matching the usual reading.

Warmest Year

Last year probably overtook 1998 to become the warmest year on record in the U.S., the National Oceanic and Atmospheric Administration said in a monthly climate report.

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.

Natural gas output in the lower-48 states rose to a record in October as more of the fuel was pumped from shale formations in the Northeast and North Dakota, the Energy Department said yesterday.

Gross gas production increased 0.4 percent to 73.54 billion cubic feet a day from a revised 73.22 billion in September, the department’s Energy Information Administration said in the monthly EIA-914 report.

Supplies from the “other states” category rose 1.8 percent to 23.94 billion cubic feet a day from a revised 23.51 billion in September. Production in that region advanced “as operators reported new wells coming online in the Marcellus and Bakken shale plays,” the department said.

Stockpile Estimate

An Energy Department report scheduled for release Jan. 10 may show that stockpiles fell by 190 billion cubic feet in the seven days ended Jan. 4 to 3.327 trillion, the median of three analyst estimates compiled by Bloomberg shows. The five-year average decline for the week is 121 billion, according to Martin King, an analyst at FirstEnergy Capital Corp. in Calgary.

Inventories totaled 3.517 trillion cubic feet in the week ended Dec. 28, the department said last week. Supplies were 12.4 percent above the five-year average for the seven-day period, up from a surplus of 4.6 percent at the end of November and down from 61 percent in March.

Stockpiles rose to an all-time high of 3.929 trillion in the week ended Nov. 2.

The boom in oil and natural gas production has helped the U.S. cut its reliance on imported fuel. America met 83 percent of its energy needs in the first nine months of last year, department data show. If the trend continued through 2012, it would 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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