Natural gas tumbles on forecasts of warmer U.S. weather

Natural gas futures dropped for a second day on forecasts of moderating temperatures that may reduce demand for the power-plant fuel.

Gas tumbled after Commodity Weather Group LLC in Bethesda, Maryland, said colder-than-average weather in most of the lower-48 states this week would give way to above-normal temperatures from Jan. 7 through Jan. 11. The low in New York on Jan. 9 may be 38 degrees Fahrenheit (3 Celsius), 11 higher than usual, according to AccuWeather Inc. in State College, Pennsylvania.

“We’re going to see some warm weather across the primary gas-consuming regions,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “As we get into the new year without signs of sustained cold weather, the fundamental picture is going to force us lower.”

Natural gas for February delivery fell 11.8 cents, or 3.5 percent, to $3.233 per million British thermal units at 9:32 a.m. on the New York Mercantile Exchange. The futures have risen 8.1 percent from a year ago. Trading volume was up 58 percent from the 100-day average at 9:47 a.m.

Gas declined to $3.05 in electronic trading late yesterday, the lowest since Sept. 26, before rebounding. A 900-contract sell order at 7:52 p.m. yesterday caused the “scary” drop, Drew Wozniak, vice president of market research and analysis at ICAP Energy LLC in Louisville, Kentucky, said in a note to clients today.

Futures have plummeted 18 percent since rising to a one- year intraday high of $3.933 on Nov. 23 on below-average weekly stockpile declines due to mild weather.

Warmest Ever

The year 2012 will probably overtake 1998 to become the warmest on record in the U.S., according to the National Oceanic and Atmospheric Administration. The first 11 months were the warmest start to any year in the contiguous states since the nation began keeping records in 1895, NOAA’s Climatic Data Center said Dec. 6.

U.S. gas inventories totaled 3.652 trillion cubic feet in the week ended Dec. 21, a record for this time of the year, a department report last week showed. Supplies were 12.8 percent above the five-year average, up from 4.6 percent at the end of November. The surplus had risen to 61 percent at the end of March. Stockpiles reached an all-time high of 3.929 trillion cubic feet during the week ended Nov. 2.

The U.S. raised its forecast for natural gas output in 2012 by 0.6 percent in a report Dec. 11.

Production Record

Marketed gas production averaged 69.22 billion cubic feet a day, up from 68.84 billion estimated in November, the Energy Department said in its monthly Short-Term Energy Outlook. Output may increase 0.5 percent in 2013 to 69.59 billion a day, department estimates show.

Gas prices at the benchmark Henry Hub in Erath, Louisiana, will average $2.78 per million British thermal units, compared with the previous estimate of $2.77, according to the report from the department’s Energy Information Administration.

The boom in oil and natural gas production helped the U.S. cut its reliance on imported fuel. America met 83 percent of its energy needs in the first nine months of the year, department data show. If the trend goes on through 2012, it will be the highest level of self-sufficiency since 1991.

Bloomberg News

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