Press Esc to close

WorldOil

World Oil News Center



Natural gas plummets on warm weather forecasts

NEW YORK -- Natural gas futures fell as leading forecasters predicted the current spurt of cold weather soon would give way to unusually warm temperatures. Natural gas for February delivery settled 11.8 cents, or 3.4%, lower at $3.351 per MMbtu on the New York Mercantile Exchange.

Weather in parts of the critical heating regions of the Midwest and the Northeast is currently at below-normal temperatures. However, meteorologists see conditions warming, starting as soon as this weekend.

"It' s pretty safe to say we' ll be well above normal for the second week of January," said Dan Leonard, senior meteorologist at Weather Services International, a private forecaster. Mr. Leonard expects the cold temperatures to gradually peter out later this week and to see gradual warming thereafter. "There' s a lot of warmer changes on the way," said Matt Rogers, president of Commodity Weather Group, another private forecaster.

Forecasters still think there are signs the weather will chill again in the second half of January. But forecasts so far out in time are inherently more uncertain and tend to be given lower credence by markets. The warm weather will last "roughly through midmonth," Mr. Leonard said. "Beyond that, it' s a little bit harder to tell."

Natural-gas stocks now stand nearly 13% above the five-year average for this time of year following recent weak supply withdrawals due to warm weather. The presence of such a huge stash of natural gas will weigh on prices until it is worked off due to cold weather.

"There' s really no weather out there to take a lot of the surplus out," said John Woods, a trader at J.J. Woods Associates. Mr. Woods said the current cold weather "has already been digested" by the market.

Aaron Calder, an analyst at Gelb & Associates, a Houston consultancy, said there are strong factors that set a floor on gas prices of around $3.30. For example, prices below this level act as incentive to replace coal-fired electricity with gas-fired power. But Mr. Calder said a major rise from this level would demand cold weather. "To see the price go much higher, you' d need some heating demand," Mr. Calder said.

Natural-gas stocks are currently also 2.3% above the level in the winter of 2011-2, which saw very little cold weather. Jim Ritterbusch, head of oil-trading advisory firm Ritterbusch and Associates, predicted that until this winter shows a supply deficit compared with last year' s, "this market will likely remain entrenched in a choppy-sideways mode."

Dow Jones Newswires

01/01/2013

 

Bookmark and Share


WO DATA HUB

EngineeringTablesIcon-Large

Engineering Data Tables

World Oil's specialized upstream Engineering Data Tables featuring the Drill Bit Classifier, Tubing Tables and more. Get Total Access today.

WO SUPPLEMENTS

2013 Fracturing Technology

2013 Fracturing Technology

MEDIA CENTER

By Digital Publisher

Drill Bit Classifier World Oil published its renowned Drill Bit Classifier in September 2013. The Drill Bit Classifier is a comprehensive listing of major manufacturers' d...

ENERGY EVENTS

Upcoming Events