Natural Gas Keeps Falling on Mild Weather
November 27, 2015 (Source: Wall Street Journal) — Natural gas prices finished nearly unchanged, but January, the new front-month contract, is falling for the seventh time in eight sessions as mild weather continues to damp expectations for demand.
Prices for January settled down 8.7 cents, or 3.8%, at $2.212 a million British thermal units on the New York Mercantile Exchange. The recent price is slightly higher than the $2.206/mmBtu that the December contract settled at when it expired Wednesday, the last session before the Thanksgiving holiday.
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Friday’s losses ensured gas fell for the ninth time in 11 weeks. It lost 7.9 cents, or 3.5%, this week.
A short spell of cold weather has passed and forecasts are showing a return to far-above-normal temperatures that will last now into early December. Half of U.S. homes use gas for heat, making winter demand the market’s primary driver.
Commodity Weather Group LLC in Bethesda, Md., is showing even warmer temperatures than it did on Wednesday. Temperatures from 3 to 15 degrees Fahrenheit above normal will cover most of the eastern states through Dec. 11, with major population centers and markets for gas heat in Chicago, Washington, New York and Boston now more likely to see the higher end of that range. The Southeast is about to get hit with the warmest of those temperatures and cold previously forecast for Texas and the Rockies to start December is now unlikely, Commodity Weather Group said.
“Guys are playing golf and going fishing, and you look at next week and it’s still very, very moderate,” all bad signs for short-term heating demand that are shaking the market, said John Woods, president of JJ Woods Associates and a Nymex trader.
Mild temperatures like this through the fall have pushed prices to new three-year lows in recent months. Today’s price is an all-time low for January 2016 futures. Many traders expect mild weather to extend through much of the winter because of the weather phenomenon El Niño, which often brings unseasonably warm temperatures to northern states.
Natural gas inventories typically fall at this time of year due to strong demand, but they have been rising in recent weeks. They surpassed 4 trillion cubic feet in the week ended Nov. 20 for the first time ever, also keeping prices low.
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