Natural gas futures pulled back from 3 1/2-year highs but held above the
psychologically important $5 level Monday on worries that demand this
week might be weaker than previously expected.
Natural gas for March delivery fell 11 cents, or 2.1%, to
$5.072 a million British thermal units on the New York Mercantile
Exchange.
Prices surged 20% last week to trade above $5/mmBTU for the
first time since June 2010 as forecasts called for another surge of
Arctic temperatures to hit the eastern U.S. in late January.
Natural-gas supplies have fallen below average levels this
winter as unusually cold weather has fueled considerable demand for
gas-powered indoor heating. About half of U.S. households use natural
gas as their primary heating source, according to the U.S. Energy
Information Administration.
However, weather forecasts on Monday said that temperatures
this week might be less cold than previously forecast, which could
reduce heating demand.
The East Coast and South could see warmer weather than
previously expected this week, though colder-than-average temperatures
are still expected to dominate "over the next few weeks," said Bethesda,
Md.-based forecaster Commodity Weather Group LLC.
"The forecast is a bit warmer than when we left the office on
Friday," said Bob Yawger, director of energy futures for Mizuho
Securities USA Inc. "We're sliding toward $5 here."
However, market watchers still expect a weekly government
storage report to show that natural-gas inventories fell by a
larger-than-average amount last week, further tightening supplies, Mr.
Yawger said.
Natural-gas stockpiles stood at 2.423 trillion cubic feet as
of Jan. 17, 13% below the five-year average for the week, according to
the U.S. Energy Information Administration. The EIA is scheduled to
release inventory data for the week ended Jan. 24 on Thursday.
Continued large withdrawals from storage could keep
natural-gas prices elevated above $4/mmBTU even after the cold-weather
subsides in the spring, Mr. Yawger said.
Natural gas for next-day delivery at the benchmark Henry Hub
in Louisiana recently traded at $5.59/mmBTU, according to
IntercontinentalExchange Group Inc., versus Wednesday's average of
$5.1853/mmBTU.
Natural gas for next-day delivery at Transcontinental Zone 6
in New York traded between $40 and $150/mmBTU, compared with an average
of $59.9819/mmBTU Friday.