Natural gas declined on Friday and headed for a second weekly drop, following EIAs bearish report yesterday and amid long-term US weather forecasts that called for moderate temperatures later in February.
On the New York Mercantile Exchange (NYMEX), natural gas for delivery in March lost 3.46% to trade at $4.761 per million British thermal units by 12:11 GMT. Prices hit a session high at $5.019 per mBtu, while day’s low was touched at $4.744 per mBtu. On February 5, the contract hit $5.734 per mBtu, the strongest level since January 2010.
Prices soared 17% last month, the largest monthly advance since September 2012, after the energy source settled last year 26% higher, the best performance since 2005 and second straight annual advance.
CME Group Inc. announced on Tuesday, that effective from February 6th, the initial margin for next-month natural gas futures, traded on NYMEX, will increase almost 10% to $ 5 500 for speculators from $5 005. This will be the highest margin requirement in more than 4 years, and will be almost double the initial margin at the beginning of this year, which was $2 530.
According to Standard & Poor’s GSCI gauge of 24 commodities, gas futures are the most volatile commodity this year as volatility more than doubled from 31.64% last year to 80.2% in 2014.
US gas inventories levels
The Energy Information Administration said in its weekly storage report that US natural gas inventories fell by 262 billion cubic feet in the seven days through January 31st, less than the median forecast of 273 billion cubic feet, by 19 analysts in a Bloomberg survey. However, the decline outstripped the five-year average drop of 151 bcf and last year’s 129-bcf decrease during the comparable week.
Total gas held in US underground storage hubs fell to 1.923 trillion cubic feet, 28.8% below last year’s amount of 2.701 trillion cubic feet during the comparable week. The deficit to the five-year average widened to a record 22.4%, up from 16.6% a week earlier.
Inventories at the East Region received a net withdrawal of 143 bcf and fell to 920 bcf, 25.3% below the five-year average of 1.232 trillion cubic feet. Stockpiles in the West Region fell by 26 bcf to 327 bcf and were 15.7% beneath the average. Inventories at the Producing Region slid by 93 bcf. At 702 bcf, they were 21% below the five-year average amount of 889 billion cubic feet.
Short-term weather outlook
NatGasWeather.com reported on February 7th that even though the weather will remain quiet over the central and eastern US over the next few days, temperatures will remain quite chilly, which in turn will lead to high natural gas and heating demand. By Saturday, a fairly wet weather system is expected to track across the southern US, while at the same time a Canadian Clipper may bring snowfall over the Midwest.
Another round of below-average temperatures will invade in the northern states Monday and Tuesday. Although the weather pattern at the end of the period (February 13th), remains a bit sloppy, the website predicts high natural gas demand as the highest-consumption states of the north will experience cold temperatures, accompanied by a fresh dose of snow.
Extended forecast
NatGasWeather.com’s extended forecast for the period ended February 20th called for a very active weather pattern over the US through the third week of February. Winter storms will track through the central and eastern US, some of which will be fairly strong. New Canadian cold front will bring yet another round of below-normal temperatures.
another Canadian cold front that will usher in yet another round of below normal temperatures.
A brief break in the action is expected around February 19-21st, as a big storm hits the west coast and brings a huge ridge through central and eastern US. The warming is predicted to be short-lived, but for now forecasts are struggling to predict its duration.
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