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Natural Gas Falls a Second Day on Milder U.S. Weather Forecasts

December 16, 2013

Dec. 16 (Bloomberg) -- Natural gas fell for a second day in New York on speculation that milder weather will limit demand for the heating fuel.

Futures slid as much as 3.4 percent as Commodity Weather Group LLC predicted that below-normal temperatures in the Northeast this week will give way to seasonal or higher readings Dec. 21 through Dec. 25. The low in New York will climb to 42 degrees Fahrenheit (6 Celsius), 11 above normal, on Dec. 20, according to AccuWeather Inc.

"We have been operating under a below-normal forecast for a while; now, we are going to break out of that," said Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York. "We are getting normal temperatures over the weekend and that is putting pressure on the market."

Natural gas for January delivery fell 7 cents, or 1.6 percent, to $4.281 per million British thermal units at 2:07 p.m. on the New York Mercantile Exchange. Trading volume was 41 percent above the 100-day average. Gas has climbed 28 percent this year.

January futures traded at a 0.6 cent discount to February from a 0.1 cent premium on Dec. 13. March gas traded 13 cents above the April contract, compared with 18.2 cents on Dec. 13.

February $5.40 calls were the most active options in electronic trading. They were 2.4 cents lower at 2.8 cents per million Btu on volume of 901 at 2:01 p.m. Calls accounted for 74 percent of trading volume.


Christmas Weather


"The big story today is the significant reduction of the Christmas week cold outbreak, as we are now only seeing some weak, transient cooling with more variability for a much-reduced demand impact," Matt Rogers, president of Commodity Weather Group in Bethesda, Maryland, said in a note to clients today.

Temperatures 5 to 8 degrees Fahrenheit higher than normal are expected from eastern Louisiana to southern New Jersey from Dec. 21 to Christmas Day, Rogers said. Readings 3 to 5 degrees above the norm are likely through most of California into Oregon and parts of Washington.

About 49 percent of U.S. households use gas for heating, according to the Energy Information Administration, the Energy Department’s statistical arm.

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