Natural gas lower as mild winter forecasts continue

CommoditiesFeb 21, 2012 03:52PM ET - Natural gas prices traded lower Tuesday, on continued mild winter weather and high supply numbers.  

On the New York Mercantile Exchange, natural gas futures for April delivery traded at USD2.78 per million British thermal units during late U.S.  trade, giving back 1.63%.   

It earlier fell by as much as 4.1% to trade at a two-day low of USD2.711 per BTU. 

There was neither floor trading nor a closing price on the NYMEX Monday because of the U.S. Presidents’ Day holiday. Tuesday’s trades will be booked with yesterday’s electronic transactions for settlement.

Today’s selling was amplified when the Commodity Weather Group said warming was likely for the next two weeks in the U.S. Midwest, East and South. 

According to the firm, temperatures in the Northeast may be 8 degrees above normal throughout the period. For the eastern U.S. as whole, temperatures may be 5 degrees higher than normal.

Weather service provider AccuWeather offered a similar outlook. The company expects temperatures in the U.S. Northeast and Midwest to mostly average above-normal for the next five days.

Winter so far in the U.S. has been the second mildest since 1950. It is running about 13% warmer than the 30-year normal, according to recent data from MDA EarthSat.    

Inventory withdrawals this winter are running nearly 530 billion cubic feet below average, or about 33%, due to the lack of heating demand this winter.

Last winter at this time, cold weather conditions led to a decline of more than 1.9 trillion cubic feet from U.S. storage to help meet the surge in heating demand. 

In contrast, only 1.1 trillion cubic feet of storage gas has been burned this winter season, a 42% drop.

Total U.S. natural gas inventories stood at 2.761 trillion cubic feet as of last week, 42% above year-ago levels and 38% higher than the five-year average for this time of year. 

Early withdrawal estimates for Thursday’s storage data range from a decline of 110 billion cubic feet to 171 billion cubic feet, compared to last year's drop of 102 billion cubic feet and the five-year average decline for the week of 145 billion.

Natural gas prices rallied nearly 10.5% in the final two sessions of the preceding week, the biggest two-day gain since October, after Canada’s biggest natural gas producer, Encana, announced plans to cut gas production by as much as 600 million cubic feet per day in a bid to boost prices for the heating fuel.

However, market participants were reluctant to bet that prices will rise further amid a lack of production cut announcements from other major U.S. natural gas producers. 

Traders said planned cuts so far were not enough to tighten a market seen oversupplied by as much as 3 billion cubic feet per day, or more than 4%.

Many analysts now expect gas inventories to end the winter at a record high 2.215 trillion cubic feet, 43% above the five-year average.

Elsewhere on the NYMEX, light sweet crude oil futures for delivery in April soared 2.47% to trade at USD106.16 a barrel.

Natural gas lower as mild winter forecasts continue

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