NEW YORK: US natural gas futures fell about 5% to a six-month low on Tuesday on record output and forecasts for milder weather and lower heating demand than previously expected that should allow utilities to leave more gas in storage than usual through late December.
Analysts forecast there was currently about 7.8% more gas in storage than usual for this time of year.
Front-month gas futures for January delivery on the New York Mercantile Exchange fell 12.0 cents, or 0.49%, to settle at $2.311 per million British thermal units (mmBtu), their lowest close since June 12. On Monday, the contract closed at its lowest since June 14.
That kept the front-month in technically oversold territory with a Relative Strength Index (RSI) below 30 for a fifth day in a row for the first time since February.
With record production and ample amounts of gas in storage, futures have been sending bearish signals for weeks that prices this winter (November-March) likely already peaked in November.
One of the biggest signs that the market has given up on winter price spikes was the collapse of the premium of futures for March over April to an all-low near zero cents per mmBtu.
The industry calls the March-April spread the “widow maker” because rapid price moves on changing weather forecasts have forced some speculators out of business, including the Amaranth hedge fund, which lost more than $6 billion in 2006.
March is the last month of the winter storage withdrawal season and April is the first month of the summer storage injection season.
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