Warmer weather aids heat expense

December 28, 2005|By BLOOMBERG NEWS

NEW YORK -- Natural gas futures plunged 10 percent yesterday, the largest one-day drop in almost three years, as warmer-than-normal weather cut demand for the furnace fuel.

"The long-range forecast is for more warm weather," said Michael Rose, director of the trading desk at Angus Jackson Inc. in Fort Lauderdale, Fla. "There's no doubt about it. When it's cold in New York, the prices go higher, and when it's warmer, prices go lower."

U.S. heating demand will run 30 percent below normal for the next week and 22 percent below normal from Jan. 2 to Jan. 6, according to Weather Derivatives, a Belton, Mo.-based forecaster. New York will have a low tomorrow night of 41 degrees Fahrenheit, the National Weather Service said. That's 13 degrees above normal.

Gas for January delivery fell $1.261 to $11.022 per million British thermal units on the New York Mercantile Exchange. The 10 percent drop was the biggest fluctuation of any commodity yesterday and the largest one-day decline for gas futures since March 3, 2003. Prices are down 30 percent from a record $15.78 per million Btu Dec. 13 and are the lowest since Sept. 13.

Prices pushed below the 100-day moving average of $12.11 per million Btu during the session, a move considered significant by technical analysts, who use charts and graphs to help make investment decisions. Gas briefly dipped below the average last week before rebounding.

Petroleum prices also dropped as fuel use eased. Home-heating demand in the Northeast, where 80 percent of the nation's heating oil is used, will be 25 percent below normal through Jan. 3, Weather Derivatives predicted.

Crude oil for February delivery fell 27 cents, or 0.5 percent, to $58.16 a barrel in New York, 41 percent higher than a year ago.

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