Natural gas futures retreated from a six-week high in New York amid speculation that frigid weather now and in February won’t be enough to erode a supply surplus.
Gas slid 0.2 percent as forecasters including Commodity Weather Group LLC in Bethesda, Maryland, said a patch of mild weather in the last week of January may be sandwiched between blasts of icy cold from Chicago to the Atlantic. Temperatures in most of the western U.S. will be seasonal or higher over the next 15 days.
“What we have is inconsistent weather patterns and I think we are going to see inconsistent trading,” said Dominick Chirichella, senior partner at the Energy Management Institute in New York. “I don’t think there is anything in front of us that suggests we are headed for a sustainable cold spell.”
Natural gas for February delivery fell 0.8 cent to settle at $3.558 per million British thermal units on the New York Mercantile Exchange after reaching $3.645, the highest intraday price since Dec. 7. Gas has climbed 6.2 percent this month.
Electronic trading yesterday during the Martin Luther King Jr. holiday was wrapped into today’s close.
Freezing weather sent gas for prompt delivery to five-year highs today in the Northeast. The low in New York City is expected to be 14 degrees Fahrenheit (minus 10 Celsius), 13 below the usual reading, while Boston may be 10 below normal at 10 degrees, according to AccuWeather Inc. in State College, Pennsylvania.
Spot gas at the Algonquin City Gates for deliveries to locations including Boston rose $8.8285 per million Btu, or 71 percent, to $21.2106 on the Intercontinental Exchange. Iroquois Zone 2 gas outside of New York City rose $9.8214, or 81 percent, to $21.9988. Both prices were the highest since January 2008.
Gas pared losses after a noon update to the government’s weather model showed that temperatures from Pennsylvania through New England will be a couple of degrees lower than previously expected, said Aaron Calder, senior market analyst at Gelber & Associates in Houston. He said there was also technical support for futures at $3.50.
February $3.40 puts were the most active options in electronic trading today on the Nymex. They fell 0.7 cent to 1.3 cents per million Btu on volume of 1,490 lots as of 3:10 p.m.
From today to Jan. 26, and again from Feb. 1 to Feb. 5, temperatures from the Midwest to the East Coast and throughout Ontario and western Quebec may be 8 degrees Fahrenheit (4.4 Celsius) below normal, said Matt Rogers, president of Commodity Weather Group in Bethesda, Maryland. The weather in those areas will be seasonal during the interval, he said.
While the third week of January is typically the coldest week of the year in the U.S., “this may be an atypical year, where the cold breakout may occur in February,” said Teri Viswanath, director of commodities strategy at BNP Paribas SA in New York.
Historically, January accounts for 25 percent of heating demand followed by February at 22.6 percent and December at 20.8 percent, she said.
Gas inventories totaled 3.168 trillion in the week ended Jan. 11, 11.1 percent above the five-year average for the period, EIA data show. Supplies compared with year-earlier levels fell to a deficit of 4.4 percent, the most in 17 months.
The EIA is scheduled to release its next weekly supply report on Jan. 24.
U.S. stockpiles probably fell by a “decent” 178 billion cubic feet last week, Mike Fitzpatrick, editor of the Energy OverView newsletter in New York, wrote today. “It is next week’s withdrawal, in the aftermath of the current arctic blast, which will provide the drama and, possibly, the last surge for this season’s price action.”
Next week’s inventory report may propel prices toward $4, “but such a move would be represent a most inviting shorting opportunity,” he said.
Forecasts for cold weather prompted hedge funds to raise bets on gas by the most in more than three months, according to the Commodity Futures Trading Commission’s Jan. 18 Commitments of Traders report.
Money managers increased net-long positions, or wagers on rising gas prices, by 16,312 futures equivalents, or 27 percent, to 76,733 in the week ended Jan. 15, CFTC data show. It was the biggest weekly percentage gain since Oct. 2.