U.S. Natural Gas Retreats on Outlook for Milder End to January

  • 'A record amount of gas in the ground' is depressing prices
  • Prices drop from the highest settlement since Oct. 20

Natural gas futures fell from an 11-week high in New York on speculation that milder weather at the end of January will do little to erase a supply glut.

A blast of cold air across the East over the next 10 days will give way to above-normal temperatures in the northern U.S. Jan. 21 through Jan. 25, according to MDA Weather Services. Boston’s high on Jan. 19 will be 29 degrees Fahrenheit (minus 2 Celsius), 6 below normal, before climbing three days later to 43, said AccuWeather Inc.

“You need cold weather and a huge amount of gas burn for six to eight weeks,” said Gene McGillian, senior analyst at Tradition Energy in Stamford, Connecticut. “With these forecasts, I wouldn’t be surprised if you get toward the end of January and February and the market loses all of its buoyancy. We still have a record amount of gas in the ground.”

Gas for February delivery fell 7.6 cents, or 3.1 percent, to close $2.396 per million British thermal units on the New York Mercantile Exchange. The futures on Friday rose to $2.472, the highest settlement since Oct. 20. Gas is down 19 percent from a year ago.

Prices are sputtering on concern that heating demand isn’t robust enough to drain a supply glut, said Tom Saal, senior vice president of energy trading at FCStone Latin America LLC.

Supply Overhang

Gas stockpiles stood at 3.643 billion cubic feet as of Jan. 1, about 15 percent above the five-year average for the time of year, according to U.S. Energy Information Administration data. The supply overhang deepened even as utilities withdrew the most gas from inventory in the week ended Jan. 1 since March.

The EIA’s next gas storage report scheduled for release on Thursday may show inventories dropped by 170 billion cubic feet last week, based on the median of three analyst estimates compiled by Bloomberg. While that would be the biggest decline since last March, it would still fall short of the five-year average draw of 178 billion for the week.

“It’s just supply,” Saal said. “People have to start pushing gas out of storage.”

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