Gas Traders Bet on Winter's End as U.S. Forecasts Turn Warmer

  • Nymex futures cap biggest one-day drop since December
  • Outlooks show mild weather in central U.S. Feb. 11-15

Spring is already here for U.S. natural gas traders.

Futures capped the biggest one-day drop in a month as forecasts called for mostly average or above-normal temperatures in the central U.S. from Feb. 11 through Feb. 15. Earlier outlooks had signaled frigid weather in the region.

Without a boost in heating demand, a gas stockpile surplus to the five-year average will expand, pushing prices lower. Production from shale formations has left inventories at a seasonal record.

“Whatever hopes there were for cold weather to kick off February have dissipated,” said John Kilduff, a partner at Again Capital LLC in New York. “It’s a real worry at this point that we’re not going to get any more significant heating demand.”

Natural gas for March delivery fell 14.6 cents, or 6.4 percent, to settle at $2.152 per million British thermal units on the New York Mercantile Exchange, the biggest slide since Dec. 30. Prices are down 7.9 percent this year.

Gas production, which reached a fifth straight annual record last year, has climbed even as the number of rigs drops to the lowest ever. U.S. gas output rose 0.6 percent in November to 91.5 billion cubic feet a day from the prior month, Energy Information Administration data show.

“Traders are rightly concerned about the potential for a storage glut if winter ends early,” Aaron Calder, an analyst at Gelber & Associates in Houston, wrote in a note to clients Monday.

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