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Gas futures fall 2.3% to $3.500 a million British thermal units
--Warm weather now and into next two weeks drives selloff
By Christian Berthelsen Of DOW JONES NEWSWIRES NEW YORK (Dow Jones)--Natural gas futures resumed their fall in early trading Monday, dropping more than 2% as warmer-than-normal temperatures were forecast for much of the northern tier of the country.
Natural gas for January delivery recently traded down 8.4 cents, or 2.3%, at $3.500 a million British thermal units on the New York Mercantile Exchange. Futures jumped last week on a surprise decline in inventories and optimism that the arrival of winter months might finally drive demand, but have fallen 3.7% in the last two sessions as warm weather persists. Gas is a key component of electricity generation, and demand rises and falls as people heat or cool their homes.
"It really is a weather market right now," said Phil Flynn, an analyst with PFG Best in Chicago. "It's hard to focus on the technicals when the weather is so bad."
Natural gas is trading at its lowest levels in years, amid a supply glut caused by record domestic production and mild weather-driven demand. Stored inventories are 1.1% higher than a year ago and 6.4% higher than the five-year average.
Meteorologists with MDA EarthSat expect a warming trend across the northeast and midwest as far out as the next 11 to 15 days, signaling low heating needs in those areas.
Meanwhile, natural gas for next-day delivery at the benchmark Henry Hub in Louisiana recently traded at $3.4150/MMBtu, according to IntercontinentalExchange, up from Friday's average of $3.3483. Natural gas for next-day delivery at Transcontinental Zone 6 in New York traded at $3.66/MMBtu, up from Friday's average of $3.6339.