Natural Gas Slips to 1-Week Low on Forecasts for Fading Cold

Natural gas futures declined to a one-week low in New York on forecasts for mild spring weather that would limit heating demand after a cold spell in the Northeast.

Temperatures in the contiguous U.S. may be mostly average from April 2 to April 6, after below-normal temperatures in the Northeast and Great Lakes region ease, according to Commodity Weather Group LLC in Bethesda, Maryland. The low in Chicago on April 5 may be 38 degrees Fahrenheit (3 Celsius), matching the usual reading, AccuWeather Inc. said on its website.

“It’s the low-demand season, and there’s just not a lot to drive the market higher,” said Phil Flynn, a senior market analyst at Price Futures Group in Chicago. “Prices are going to come down and test recent lows.”

Natural gas for April delivery fell 5.3 cents, or 1.9 percent, to $2.733 per million British thermal units on the New York Mercantile Exchange, the lowest settlement since March 16. Prices have dropped 5.4 percent this year.

BNP Paribas SA cut its forecast for average 2015 natural gas prices to $3 per million Btu from $3.20, Teri Viswanath, director of commodity strategy for the bank in New York, said in e-mailed note to clients. BNP recommended a short May 2015 futures position.

“Despite the strong finish to the winter heating season, U.S. storage facilities might not be sufficiently drained to accommodate surplus production over the summer,” Viswanath said.

The low in Cleveland on April 6 may be 44 degrees Fahrenheit, 6 higher than average, according to AccuWeather in State College, Pennsylvania.

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

Narrower Deficit

Gas stockpiles totaled 1.467 trillion cubic feet as of March 13, 13 percent below the five-year average, narrowing from a record 55 percent deficit at the end of last March.

Natural gas production in the U.S. may rise 5 percent this year to average an all-time high of 78.39 billion cubic feet a day, the EIA said March 10 in its monthly Short-Term Energy Outlook report.

Output from the Marcellus shale formation in the Northeast may climb to 16.787 billion cubic feet a day in April, up 21 percent from a year earlier, the EIA said March 9 in its monthly Drilling Productivity Report. Production from the top seven U.S. shale basins, which accounted for all U.S. gas output growth from 2011 to 1013, will advance 0.5 percent to 46.153 billion cubic feet a day.

Low oil and gas prices will prevent most proposed liquefied natural gas export terminals from moving forward within the next three years, Trevor Sikorski, an analyst at Energy Aspects Ltd. in London, said in a note to clients Monday.

LNG Projects

In the U.S., Cheniere Energy Inc.’s Corpus Christi LNG and Golden Pass LNG, a joint venture of Qatar Petroleum, Exxon Mobil Corp. and ConocoPhillips, are the projects most likely to make final investment decisions by 2017, Energy Aspects said.

“We expect the next three years will be a fallow period for further LNG developments on the supply side,” Sikorski said. “However, projects just need to hang on until global gas demand catches up with the increasingly buoyant supply side.”

Net-short wagers on U.S. natural gas fell 66 percent to 10,893 lots, the least in 10 weeks, the Commodity Futures Trading Commission said March 20 in its weekly Commitments of Traders report. The measure includes an index of four contracts adjusted to futures equivalents.

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