Dec. 4 (Bloomberg) -- Natural gas futures slid for a second day in New York as forecasts showed milder weather that would curb consumption of the heating fuel.
Gas dropped 0.4 percent as WSI Corp. in Andover, Massachusetts, predicted mostly normal or higher-than-average temperatures in the lower-48 states from Dec. 14 through Dec. 18. The low in New York on Dec. 14 may be 37 degrees Fahrenheit (3 Celsius), 5 more than usual, according to AccuWeather Inc. in State College, Pennsylvania.
“The longer-term forecast is looking a little bit milder for the rest of December into January,” said Dominick Chirichella, senior partner at the Energy Management Institute in New York. “The market is going to struggle to move significantly higher.”
Natural gas for January delivery fell 1.6 cents to settle at $3.96 per million British thermal units on the New York Mercantile Exchange. Trading volume was 15 percent below the 100-day average at 2:52 p.m. Prices are up 18 percent this year. Gas rose above $4 in intraday trading for a second day.
The premium of January to February futures was 0.2 cent, unchanged from yesterday. March gas traded 3.2 cents above the April contract, compared with 3.7 cents yesterday.
January $3 puts and January $5.50 calls were the most active options in electronic trading, both with volume of 1,895 lots, and both dropping 0.1 cent to 0.1 cent. Puts accounted for 58 percent of trading volume.
The low in Cleveland on Dec. 14 may be 31 degrees, 1 more than usual, AccuWeather data show. About 49 percent of U.S. households use gas for heating, according to the Energy Information Administration, the Energy Department’s statistical arm.
A government report scheduled for release tomorrow may show gas stockpiles fell by 145 billion cubic feet last week, compared with the five-year average drop for the period of 41 billion, according to the median of 18 analyst estimates compiled by Bloomberg.
Gas inventories totaled 3.776 trillion in the seven days ended Nov. 22, 0.5 percent above the five-year average and 2.6 percent below the year-ago total.
Marketed gas output in the U.S. may climb 1.5 percent this year to a record 70.29 billion cubic feet a day, the EIA said Nov. 13 in its monthly Short-Term Energy Outlook.
Natural gas production from the Marcellus shale formation in the U.S. Northeast may increase 3.3 percent in December to 12.9 billion cubic feet a day from an estimated 12.5 billion in November, the EIA said Nov. 12 in its monthly Drilling Productivity Report.
Supply growth from the Marcellus, coupled with new pipeline capacity that will send production from the region to the Midwest and Gulf Coast, will “exert significant downward pressure” on front-month gas prices next year, Francisco Blanch, head of commodities research at Bank of America Corp. in New York, said in a note to clients today.
There is “downside risk” to the bank’s forecast of $3.80 per million Btu for the first half of 2014, Blanch said.
“With weather forecasts now shifting back towards seasonal norms and production rebounding vigorously on new Marcellus takeaway capacity, we doubt the strength in prompt Henry Hub gas prices will endure and expect prices to move lower again,” he said.
--Editors: Bill Banker, Richard Stubbe