U.S. Gas Slides to 6-Week Low as Traders Bet on Early Springby
Central U.S. temperatures may be above normal Feb. 12-16
Stockpiles at seasonal record amid production from shale
U.S. natural gas dropped to a six-week low as traders bet that the coldest days of winter are over.
Gas slid below $2 per million British thermal units in intraday trading on speculation that mild weather will leave a supply glut intact. Temperatures may be mostly above normal in the central U.S. from Feb. 12 through Feb. 16, according to MDA Weather Services.
Gas bulls need an extended chill to erode the inventory surplus, which threatens to persist into the second half of 2016. Supplies pumped from shale formations have pushed stockpiles to a record for this time of year.
“We’ve had some ridiculously warm days, and the forecasts show continued mild weather,” said Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York. “This week’s data will probably show a big withdrawal from storage, but the reports going forward are going to be more bearish.”
Natural gas for March delivery fell 12.7 cents, or 5.9 percent, to $2.025 per million British thermal units on the New York Mercantile Exchange, the lowest settlement since Dec. 23. Prices are down 13 percent this year.
Government data scheduled for release Thursday will probably show a near-normal withdrawal from gas storage for last week. Stockpiles dropped by 166 billion cubic feet, compared with the five-year average decline of 165 billion, based on the median of seven analyst estimates compiled by Bloomberg.
Gas output, which reached a fifth straight annual record last year, has advanced even as the number of rigs slides to the lowest ever. U.S. production climbed 0.6 percent in November to 91.5 billion cubic feet a day from the prior month, Energy Information Administration data show.
“With more than half of the official heating season now in the history books, the remaining half of the winter is going to have to be exceptionally cold to make up for the lost demand from the first half of the winter,” Dominick Chirichella, senior partner at the Energy Management Institute in New York, said in a note to clients Tuesday.