U.S. Gas Drops to Three-Year Low on Outlook for Balmy Christmasby
Forecasts show mild weather in U.S. East through late December
Inventories are 6.5% above five-year average for time of year
Prospects for a white Christmas are dimming as warm weather sweeps the U.S. East, and that means slumping prices for natural gas.
Gas tumbled below $2 per million British thermal units for only the second time in three years as forecasts showed above-normal temperatures that would suppress heating demand through late December. The high in New York on Dec. 25 may be 53 degrees Fahrenheit (12 Celsius), 13 more than average, AccuWeather Inc. data show.
It will take frigid weather to erode a gas inventory surplus that has lingered since May. Stockpiles reached an all-time high last month, and supply from shale drillers is sending production toward a fifth straight annual record.
“Prices are going to continue to head lower without any significant weather demand on the horizon,” said Tom Saal, senior vice president of energy trading at FCStone Latin America LLC in Miami. “Production is setting records, and we have ample quantities of gas in storage ahead of the winter.”
Natural gas for January delivery fell 2.5 cents, or 1.2 percent, to $1.99 per million British thermal units on the New York Mercantile Exchange, the lowest settlement since April 2012. Gas is down 31 percent this year, heading for a second straight annual decline. Futures dropped 9 percent this week.