Natural Gas Drops to 10-Week Low on Outlook for Milder WeatherNaureen S. Malik
Natural gas declined to a 10-week low in New York on forecasts for milder weather that would cut demand for the heating fuel.
Gas fell 0.9 percent as Commodity Weather Group LLC said “an impressive late March cold outbreak” in the central and eastern states this week will give way to seasonal or above-normal temperatures from March 28 through April 7. Inventories dropped below 1 trillion cubic feet this month for the first time in 11 years as blasts of cold air boosted demand.
“We are transitioning from winter to spring, and spring is considered a shoulder month in the natural gas market so they are expecting weaker demand,” said Tom Saal, senior vice president of energy trading at FCStone Latin America LLC in Miami. “We experienced terrific withdrawals a month ago so prices are settling down. A lot of the anxiety has been sucked out of the market.”
Natural gas for April delivery dropped 3.7 cents to $4.276 per million British thermal units on the New York Mercantile Exchange, the lowest settlement since Jan. 13. Volume for all futures traded was 50 percent below the 100-day average at 2:44 p.m. Prices are up 1.1 percent this year.
Gas has tumbled 34 percent from a five-year high of $6.493 per million Btu on Feb. 24 as the peak heating-demand season draws to a close. The discount of April contracts to October widened to 5.5 cents at 2:45 p.m., the most since Jan. 10.
A wintry Atlantic storm will give New York a “glancing blow” before bringing the heaviest snow and highest winds to coastal areas from Cape Cod to Nova Scotia, the National Weather Service said. One to 2 inches (2.5 to 5 centimeters) of snow may fall starting tomorrow from Philadelphia to New York, with eastern Long Island, Boston and coastal Massachusetts getting more. A blizzard watch was posted for Cape Cod.
Following the cold shot this week, the forecast turns warmer for the end of the month and early April for the southern half of the lower 48 states, said Commodity Weather in Bethesda, Maryland.
The low temperature in Boston today will be 17 degrees Fahrenheit (minus 8 Celsius), 16 below average, before climbing to 47 degrees, 11 above normal, on April 2, according to AccuWeather Inc. in State College, Pennsylvania.
About 49 percent of U.S. households use gas for heating, data show from the Energy Information Administration. Demand slumps after the heating season ends and before hot weather drives the need for power to run air conditioners.
Gas inventories probably fell by 61 billion cubic feet last week, Tim Evans, an energy analyst at Citi Futures in New York, said in a note to clients today. Dominick Chirichella, senior partner at the Energy Management Institute in New York, predicted a decline of 55 billion. The five-year average withdrawal for the period is 7 billion, EIA data show.
Stockpiles ended the week of March 14 at 953 billion, the lowest level since 2003, according to the EIA. Supply deficits widened to records, reaching 48 percent versus the five-year average and 49 percent compared with year-earlier levels, in government data going back to 2005.
“The 953 bcf total storage is still jarring, and punctuates the record withdrawal of gas from storage that occurred over the course of this past winter,” John Kilduff, partner at Again Capital LLC and editor of the Energy OverView newsletter in New York, wrote today. Stockpile levels may rise near record levels later this year as gas flows return quickly to replenish near-empty storage sites, he said.
“Prices appear set to fall quickly down toward $4 as support from the winter demand season evaporates,” he said.
Hedge funds cut bullish bets on four U.S. natural gas contracts by 2.4 percent to 408,941 in the week ended March 18, a six-week a low, U.S. Commodity Futures Commission data released March 21 showed. Long positions fell 1.2 percent during the period while short positions increased 1.4 percent.