Natural Gas Slumps to 29-Month Low on Mixed Weather Outlook

Natural gas tumbled to a 29-month low in New York as forecasts showed a mix of mild and colder-than-normal weather that would limit demand for the heating fuel.

Temperatures may be mostly average in the central and eastern U.S. through Feb. 18, with frigid weather confined to the Northeast, according to Commodity Weather Group LLC in Bethesda, Maryland. A gas stockpile deficit to the five-year average has narrowed to 3 percent from a record 55 percent at the end of March.

“We’re seeing conflicting reports about how cold it’s going to be,” said Phil Flynn, a senior market analyst at Price Futures Group in Chicago. “The gas market continues to be well-supplied.”

Natural gas for March delivery fell 9.2 cents, or 3.3 percent, to $2.662 per million British thermal units on the New York Mercantile Exchange, the lowest settlement since Aug. 29, 2012. Volume for all futures traded was 16 percent below the 100-day average at 2:47 p.m. Prices are down 50 percent from a year ago.

The low in St. Louis on Feb. 14 may be 26 degrees Fahrenheit (minus 3 Celsius), matching the normal reading, data from AccuWeather Inc. in State College, Pennsylvania, show. Boston temperatures may drop to 17 degrees, 7 below average.

“Extreme variability in the short-term weather forecasts has failed to inspire confidence that heating demand will sufficiently pare inventories this season,” Teri Viswanath, director of commodity strategy at BNP Paribas SA in New York, said in a note to clients.

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

Inventory Estimates

Gas inventories probably slid by 119 billion cubic feet last week, compared with the five-year average drop of 165 billion for the period, according to the median of 14 analyst estimates compiled by Bloomberg.

Stockpiles have fallen 1.028 trillion cubic feet since the end of October, 35 percent less than the same period last year and down 15 percent from the five-year average, EIA data show.

Supplies by the end of this winter may be 9 billion cubic feet above the five-year average for the time of year, the EIA said Jan. 12 in in its monthly Short-Term Energy Outlook. Marketed gas production this year will climb 3.2 percent from 2014 to 76.75 billion cubic feet a day, the report showed.

Gas output from the Marcellus shale formation in the Northeast may advance to 16.55 billion cubic feet a day in February, up 21 percent from a year earlier, the EIA said Jan. 12 in its monthly Drilling Productivity Report.

Output from the top seven U.S. shale fields in the U.S. will expand 1.4 percent to 45.44 billion cubic feet a day in February from January, the government report showed. These deposits accounted for 95 percent of U.S. gas output growth in the three previous years.

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