Natural gas drops below $3 for first time since 2012

FE Team | Published: December 28, 2014 00:00:00 | Updated: November 30, 2026 06:01:00

NEW YORK, Dec 27 (Bloomberg): Natural gas slumped below $3 per million British thermal units in New York for the first time since 2012 on speculation that record production will overwhelm demand for the heating fuel.
Futures settled at the lowest in 27 months and have plunged 26 per cent in December, heading for the biggest one-month drop since July 2008, as mild weather and record production erased a surplus to year-ago levels for the first time in two years. Temperatures will be mostly above average in the eastern half of the US through December 30, according to Commodity Weather Group LLC.
"We don't see anything scary in the forecast," said Stephen Schork, president of Schork Group Inc., a consulting group in Villanova, Pennsylvania. "You had this psyche where people were worried about a polar vortex; we had a cold October and a cold early November, and boom, if you were long you are wrong."
Natural gas for January delivery fell 2.3 cents, or 0.8 per cent, to settle at $3.007 per million Btu on the New York Mercantile Exchange. Futures touched $2.973, the lowest intraday price since Sept. 26, 2012. Volume was 54 per cent below the 100-day average for the time of day at 2:32 p.m. Gas dropped 13 per cent this week, a fifth straight weekly decline.
Prices broke below several technical support levels, including $3.046 and then $3, and may be headed toward $2.80 or lower, said Schork.
"I am playing this market short," he said. "Anyone who is selling now is trying to trigger a panic selloff."
February $2.50 puts were the most active options in electronic trading. The price slipped 0.1 cent to 2.6 cents on volume of 557 as of 2:36 p.m.
Above-normal temperatures in the East this week will give way to mostly seasonal readings from Maine to Florida through Jan. 9, according to Commodity Weather in Bethesda, Maryland. The central states will see below-normal readings on December 31 through the first week of January.
The high in New York tomorrow may be 50 degrees Fahrenheit (10 Celsius), 10 more than usual, data from AccuWeather Inc. in State College, Pennsylvania, show. Chicago temperatures may reach 46 degrees, 13 above normal.
An estimated 49 per cent of US households use gas for heating, led by the Midwest and Northeast, according to the Energy Information Administration.
"We haven't seen a lot of cold weather this winter," said Carl Larry, a Houston-based director of oil and gas at Frost & Sullivan. "The warmer it stays, the more pressure on natural gas. Gas production is not dropping and demand is not that high."
In the absence of extreme weather, rising production will leave inventories at an all-time high above 4 trillion cubic feet by the end of October 2015, BNP Paribas SA said in a report December 23.
BNP Paribas lowered its estimate for average 2015 gas prices to $3.60 per million Btu from $3.75.
"Unseasonably warm weather this month now necessitates extreme conditions ahead in order to avert a surplus," Teri Viswanath, director of commodities strategy for the bank in New York, said in the report.