Natural gas futures fell for a fourth day in New York as the outlook for milder weather signaled easing heating-fuel demand.
Gas dropped 4.1 percent as Commodity Weather Group LLC said above-normal temperatures in the central and western states next week will shift to the East from Feb. 20 through Feb. 24. Manhattan’s high on Feb. 21 may be 52 degrees Fahrenheit (11 Celsius), 9 above normal and 22 more than today’s projected high, said AccuWeather Inc.
“People are anticipating that the only way for the weather to change is to get warmer,” said Tom Saal, senior vice president of energy trading at FCStone Latin America LLC in Miami. “The momentum in the last few days has been to the downside so this is a continuation of that.”
Natural gas for March delivery fell 19.6 cents to $4.579 per million British thermal units on the New York Mercantile Exchange, the lowest settlement since Jan. 21. Volume was 3.1 percent above the 100-day average at 2:33 p.m. The futures are up 8.5 percent this year.
March gas traded 17.3 cents above the April contract, compared with 25.9 cents on Feb. 7.
March $6 calls were the most active options in electronic trading. They were 3.9 cents lower at 4.3 cents per million Btu on volume of 2,333 at 2:48 p.m. Calls accounted for 61 percent of trading volume.
Implied volatility for March at-the-money options was 54.34 percent at 2:45 p.m., compared with 64.18 percent on Feb. 7 and 32.22 for the front-month contract a month ago. Gas is the most volatile component in the Standard & Poor’s GSCI gauge of 24 commodities this year.
The current cold weather across the central and eastern U.S. will keep readings below normal over the next five days, said Matt Rogers, president of Commodity Weather in Bethesda, Maryland. This may be the third-highest demand week of the winter, based on gas demand and population, before a warmer weather pattern moves in, he said.
Chicago’s low today will drop to minus 6 degrees, 26 lower than usual, before climbing to 31 degrees, 9 above average, on Feb. 18, said AccuWeather in State College, Pennsylvania.
About 49 percent of U.S. households use gas for heating, led by the Midwest and the Northeast, data show from the U.S. Energy Information Administration, the statistical arm of the Energy Department.
“The market sounds like a balloon letting out its air, but frigid temps in much of the country are supportive,” Drew Wozniak, vice president of market research at United-ICAP, a brokerage in Jersey City, New Jersey, said in a note to clients.
Gas for immediate delivery at the Henry Hub in Erath, Louisiana, the delivery point for Nymex contracts, rose $1.7516, or 30 percent, to $7.6294 per million Btu today on the IntercontinentalExchange.
This week’s inventory report is going to be bullish and “this week is likely to be a fight over five bucks,” Wozniak said. “So I’m an intraday bull, perhaps more tomorrow than today, but this is feeling like a swing trade.”
U.S. stockpiles probably fell by 234 billion cubic feet last week, Tim Evans, an energy analyst at Citi Futures in New York, said in a note to clients today. The five-year average decline for the period is 162 billion, and supplies dropped 152 billion the same week last year, EIA data show.
Inventories ended January at 1.923 trillion cubic feet, the lowest level for the month since 2004, preliminary weekly data showed.
Money managers cut net-long natural gas positions, or wagers on rising prices, by 20,927 futures equivalents, or 5 percent, to 397,445 in the week ended Feb. 4, U.S. Commodity Futures Trading Commission data show. It was the first decline in four weeks and the biggest percentage drop since the seven days ended Nov. 22.