Natural Gas Falls as Warmer Weather Signals Reduced Consumption

Natural gas slipped for a third day in New York as forecasts showed warmer weather that would limit demand for the heating fuel.

Gas dropped 2.2 percent. Commodity Weather Group LLC said temperatures may be normal or above average on the East Coast and in the South through April 5. Stockpiles totaled 896 billion cubic feet in the week ended March 21, the lowest since 2003, government data show. Gas futures have declined 34 percent from a five-year high of $6.493 on Feb. 24.

“We’re seeing a reaction to some 60-degree days in the forecast,” said Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York. “There are going to be a significant number of days with temperatures above the average, and that’s going to be a challenge for gas demand.”

Natural gas for May delivery fell 9.5 cents to settle at $4.276 per million British thermal units on the New York Mercantile Exchange. Volume for all futures traded was 38 percent below the 100-day average at 2:58 p.m.

Philadelphia may reach 64 degrees Fahrenheit (18 Celsius) on April 5, 4 more than usual, according to AccuWeather Inc. in State College, Pennsylvania. The high in Washington may be 74, 11 above average.

About 49 percent of U.S. households use gas for heating, according to the Energy Information Administration, the Energy Department’s statistical arm.

Gas Inventories

Gas supplies were at record deficits of 50.8 percent to the five-year average and 50.1 percent to year-earlier inventories in the week ended March 21, EIA data show.

Marketed gas production may rise 2.5 percent to an all-time high of 71.96 billion cubic feet a day in 2014, gaining for a ninth consecutive year, according to EIA estimates.

Deutsche Bank AG raised its 2014 natural gas price forecast 10 percent to $4.70 per million Btu, Michael Hsueh, an analyst at the bank in London, said in a note to clients today.

“The record low level of natural gas inventories sustains upside risks for the market as we expect the storage level to remain below normal through October,” Hsueh said.

Tim Rezvan, an analyst at Sterne, Agee & Leach Inc. in New York, boosted his 2014 natural gas price outlook 8 percent to $4.60 per thousand cubic feet, or $4.50 per million Btu.

There may be increased gas market volatility in the spring and summer because of uncertainty about the industry’s ability to refill depleted inventories, Rezvan said in a note to clients today.

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