Natural Gas Futures Decline From Two-Week High on Mild Weather

Natural gas futures declined from a two-week high in New York on forecasts for milder weather that would limit demand for the heating fuel.

Gas slipped 1 percent. Commodity Weather Group LLC in Bethesda, Maryland, predicted above-normal temperatures in the Northeast through Jan. 19, followed by colder-than-average readings. The low in New York on Jan. 17 may be 32 degrees Fahrenheit (zero Celsius), 5 more than usual, according to AccuWeather Inc. in State College, Pennsylvania.

“For the market to really surge significantly higher, the weather forecasts for the second half of January are going to have to be extended,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “The last four to six weeks have shown how vulnerable the market is to the weather.”

Natural gas for February delivery fell 4.4 cents to settle at $4.325 per million British thermal units on the New York Mercantile Exchange. The futures yesterday closed at $4.369, the highest settlement since Dec. 30. Trading volume was 21 percent above the 100-day average at 2:41 p.m. Prices are up 25 percent from a year ago.

The premium of February to March futures narrowed 0.7 cent to 4.7 cents. March gas traded 19.3 cents above the April contract, compared with 20.1 cents yesterday.

Options Trading

February $5 calls were the most active options in electronic trading. They were 0.8 cent lower at 1.1 cents per million Btu on volume of 2,178 at 4:11 p.m. Calls accounted for 68 percent of trading volume.

The low in Washington on Jan. 17 may be 28 degrees, matching the normal temperature, AccuWeather data show. About 49 percent of U.S. households use gas for heating, according to the Energy Information Administration, the Energy Department’s statistical arm.

The gas market is “in a holding pattern” as traders track weather forecasts to gauge potential demand, Aaron Calder, an analyst at Gelber & Associates in Houston, said in a note to clients today.

An EIA report tomorrow may show gas inventories tumbled by 300 billion cubic feet in the week ended Jan. 10, exceeding the record withdrawal of 285 billion in the week ended Dec. 13, according to the median of 21 analyst estimates compiled by Bloomberg. The five-year average storage drop for the period is 159 billion.

Gas Inventories

Gas stockpiles totaled 2.817 trillion cubic feet as of Jan. 3, 10.1 percent below the five-year average and 15.8 percent less than last year’s supplies for the week, EIA data show. Inventories were at the lowest level since 2008 for the time of year.

The U.S. cut its forecast for gas inventories at the end of March, when they bottom out after the heating season, by 200 billion cubic feet to 1.5 trillion, Adam Sieminski, administrator of the EIA, said in an e-mailed statement Jan. 7. He attributed the revision to “a cold December and several large weekly withdrawals.”

The agency raised its estimate for 2014 gas production to 71.66 billion cubic feet a day from last month’s forecast of 71.43 billion, according to the Jan. 7 Short-Term Energy Outlook. Supplies may rise 2.1 percent from last year’s total.

The U.S. will be able to provide for all its own energy needs by 2035 as output of shale oil and gas accelerates and demand growth slows, BP Plc said today in its Energy Outlook 2035 report. The country will produce more gas and coal than it consumes, BP said.

Before it's here, it's on the Bloomberg Terminal.