Natural gas futures plunge to 3-month low on warm January weather

Investing.com - Natural gas futures fell more than 3% on Wednesday to trade at a three-month low, as forecasts showing warmer-than-normal weather across most parts of the U.S. in January weighed on sentiment.

Natural gas prices have closely tracked weather forecasts in recent weeks, as traders try to gauge the impact of shifting forecasts on winter heating demand.

On the New York Mercantile Exchange, natural gas futures for delivery in February traded at USD3.228 per million British thermal units during U.S. morning trade, down 3.65% on the day.       

It earlier fell by as much as 4.5% to trade at a session low of USD3.190 per million British thermal units, the weakest level since September 26.

Updated weather forecasts released Tuesday showed that warmer-than-normal weather was expected across key parts of the U.S. during the first two weeks of January, dampening sentiment on the heating fuel.

The U.S. National Weather Service’s six-to-10 outlook called for above-normal temperatures for a little more than the eastern half of the nation, with below-normal readings in the West.

Bearish speculators are betting on the mild weather reducing winter demand for the heating fuel. The heating season from November through March is the peak demand period for U.S. gas consumption.

Meanwhile, investors remained concerned over bloated U.S. inventory levels. Total U.S. natural gas stockpiles stood at 3.652 trillion cubic feet as of last week, 2.5% higher than last year at this time and 13% above the five-year average.

Early withdrawal estimates for this week’s storage data range from 100 billion cubic feet to 141 billion cubic feet.

Inventories fell by 77 billion cubic feet in the same week a year earlier, while the five-year average change for the week is a decline of 111 billion cubic feet.

The EIA report will be released on Friday, a day later than usual due to the New Year holiday.

Elsewhere on the NYMEX, light sweet crude oil futures for delivery in February rallied 1.85% to trade at USD93.51 a barrel, while heating oil for February delivery rose 0.85% to trade at USD3.056 per gallon.