NEW YORK (Dow Jones)--Natural gas futures fell from a two-month high Monday as near-record inventories were more than adequate to meet the arrival of colder weather.
Natural gas for December delivery fell 9.9 cents, or 2.5%, to $3.939 a million British thermal units on the New York Mercantile Exchange.
Temperatures dropped in the U.S. Northeast and other major gas-fueled heating markets over the weekend, marking the start of the delayed winter demand season. Gas prices shot up 18% last week when November futures gave way to December as the front month contract on the prospect of higher demand.
But any rally for the December contract was already on borrowed time, as U.S. storage tanks hold enough gas to meet even the coldest winter. Inventories reached 3.754 trillion cubic feet last week, and could surpass last year's record in two weeks.
"I know we saw a little bit of cold creeping in for the next week, but the fact is we're going to have record levels of storage," said Gene McGillian, an analyst with Tradition Energy in Stamford, Conn.
McGillian noted that the price for physical gas has remained low, indicating the jump in futures prices had more to do with seasonal trading patterns than any jump in real-world demand.
Investors also remain extremely pessimistic about the chances for prices to keep rising. As of Oct. 19, non-commercial traders held 173,874 more contracts betting that prices would fall than the opposite bet, according to data published by the Commodity Futures Trading Commission on Friday. That was down just 0.7% from the previous week