A return to mild U.S. weather after a brief cold spell is derailing natural gas’s rebound from a 16-year low.
Prices capped the biggest weekly decline since February 2014 as forecasts showed above-normal temperatures for the eastern U.S. in late January. Withdrawals from gas storage have fallen short of the five-year average for five straight weeks, reflecting muted heating demand.
The shale boom has pushed U.S. gas production to record levels, leaving inventories at an all-time high in November and pressuring futures lower. Without extreme cold, the biggest stockpile glut since 2013 will expand, overwhelming demand for the fuel.
“I was expecting a bigger withdrawal from gas storage, and it looks like a lot of other traders were as well,” says Dan Flynn, a trader at Price Futures Group in Chicago. “We’ve had some cold weather in the Midwest, but it may be short-lived.”
Natural gas for February delivery fell 3.9 cents, or 1.8 percent, to $2.10 per million British thermal units on the New York Mercantile Exchange, the lowest settlement since Dec. 24. Gas slumped 15 percent during the week.