US natural gas futures on Wednesday eased for a second day in a row as the market takes a break from a big rally on mixed weather forecasts. Traders noted prices started to ease from a near two-year high around noon on Wednesday because an early run of the US weather model that pointed to less cold weather over the next two weeks. Later runs of the weather model, however, showed more cold was expected during that time.
After rising 34 percent over the prior 12 days, front-month gas futures fell 3.2 cents, or 0.9 percent, to settle at $3.603 per million British thermal units. Earlier in the session, the contract rose to $3.748, its highest level since December 18, 2014.
Despite the decline, the front-month remained in technically overbought territory for a ninth day in a row, its longest streak since June. Forecasts over the past couple of weeks calling for colder weather this winter, pushed up the premium of March futures over April by more than 500 percent since it hit a recent low of 3.2 cents on November 17 as traders snapped up March contracts. Forecasts for colder weather generally mean higher winter prices, and the market uses March as a proxy for winter.
The industry calls the March-April spread the "widow maker" because its rapid moves based on changing winter weather forecasts have wiped out many traders. Analysts forecast utilities pulled just 43 billion cubic feet of gas out of storage during the warmer-than-normal week ended December 2. That compared with draws of 50 bcf in the prior week, 69 bcf in the same week a year ago and a five-year average decrease of 61 bcf.
Stockpiles, which have remained at record highs since April, were expected to fall below year-ago and five-year average levels in the coming weeks if forecasts for near-normal cold in December and above-normal cold in January prove correct, especially with US production stuck at its lowest level since 2013 for this time of year.
Comments
Comments are closed for this article.