Bloomberg News

Natural Gas Falls as Moderating Weather Cuts Heating Demand

November 28, 2012

Natural gas futures declined for the third time in four days as forecasts for mild weather next week signaled reduced demand for the heating fuel.

Gas dropped as much as 3.8 percent as forecasters including MDA Weather Services predicted above-normal temperatures for most of the lower 48 states over the next 10 days. Unusually cold weather helped reduce a supply glut this month. The December contract expires today.

“The weather is moderating so it’s wearing a little bit on the market,” said Tom Saal, senior vice president of energy trading at INTL Hencorp Futures LLC in Miami. “We’ve got an expiring contract today, that could be part of it.”

Natural gas for December delivery fell 12.7 cents, or 3.4 percent, to $3.642 per million British thermal units at 1:34 p.m. on the New York Mercantile Exchange. Prices are up 8.3 percent from a year ago.

The January futures contract dropped 12.6 cents to $3.766 per million Btu.

Volume was 175,317 contracts at 12:32 p.m. in electronic trading, up 36 percent from about 129,000 at the same time yesterday.

Gas has slumped 7.4 percent since rising to 13-month intraday high of $3.933 on Nov. 23 as revised forecasts showed a warmer start to December.

Warm weather building up over the next five days in the western two-thirds of the U.S. will spread to the East Coast next week, according to MDA in Gaithersburg, Maryland.

Rising Temperatures

The low temperature in New York City on Dec. 7 will be 45 degrees Fahrenheit (7 Celsius), 10 above normal, according to AccuWeather Inc. in State College, Pennsylvania. Chicago’s low will be 8 above normal at 33 degrees.

Heating demand in the 48 contiguous states will be 34 percent below normal from Dec. 4 through Dec. 8, data from Weather Derivatives in Belton, Missouri, show. About half of U.S. households use gas for heating.

Gas stockpiles probably fell by 7 billion cubic feet last week to 3.866 trillion cubic feet, based on a median of 19 analyst estimates compiled by Bloomberg. The five-year average change for the week is a decline of 18 billion. Supplies rose by 2 billion the same week last year, according to the department.

U.S. inventories totaled 3.873 trillion cubic feet in the week ended Nov. 16 after rising to a record 3.929 trillion two weeks earlier, according to the Energy Department, which is scheduled to release its weekly stockpile report tomorrow.

A supply surplus to the five-year averages fell to 4.5 percent in last week’s report after ballooning to 61 percent in March.

Walter Zimmerman, chief technical strategist at United- ICAP, a brokerage in Jersey City, New Jersey, said gas futures will slide to the $2.30 area by early February, based on a 20- year average decline of 40 percent that begins around the late November Thanksgiving holiday. “It is seasonally the most dangerous time to be long natural gas.”

To contact the reporter on this story: Naureen S. Malik in New York at Nmalik28@bloomberg.net;

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net


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