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US GAS: Futures Decline On Forecasts For Mild Weather

NEW YORK – Gas futures declined Monday as forecasts for warmer weather are expected to lower gas-fired heating demand for the eastern U.S.

Natural gas for March delivery fell 6.6 cents, or 2.7%, to $2.411 a million British thermal units on the New York Mercantile Exchange.

After a brief spell of cold over the weekend, forecasters expect temperatures to rise over the next two weeks for most of the U.S. Commodity Weather Group on Monday said “the big picture is still one of limited cold,” for the eastern two-thirds of the country.

The mild temperatures suggest that withdrawals from U.S natural gas stockpiles will remain modest through next month, said Jim Ritterbusch, head of trading advisor Ritterbusch and Associates, as demand for heating sags. And recent output cuts by some U.S. producers haven’t been enough to change the supply and demand outlook, he added.

“We still don’t view the production reductions that have been indicated thus far as capable of supporting prices,” said Ritterbusch.

Natural gas futures have fallen from over $4/MMBtu in September as relatively warm weather across much of the U.S. this winter reduced the need for gas-fired heating.

In most years, gas stockpiles build up through the autumn and are tapped as temperatures turn frigid. But inventories have only posted modest declines from record levels hit in November.

With the coldest part of the year soon ending, analysts say the only way to reduce the glut is for producers to cut production. Many are reluctant to do so, however, because many gas wells also produce oil, which is still fetching a profit at $100 a barrel.

Natural gas for next-day delivery at the benchmark Henry Hub in Louisiana recently traded at $2.4025/MMBtu, according to IntercontinentalExchange, down from Friday’s average of $2.5072. Natural gas for next-day delivery at Transcontinental Zone 6 in New York traded at $2.84/MMBtu, down from Friday’s average of $5.6125.

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