Gas futures stick to $3 level as forecasts call for milder temperatures
--Traders weigh high inventories against already steep price declines
--Futures recently 0.4c higher at $3.015/MMBtu
By Jerry A. DiColo
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--Natural gas futures were near flat Tuesday as traders gauge whether continued mild weather and low heating demand will be able to keep prices above the key $3 level.
Natural gas for February delivery recently traded 0.4 cent higher at $3.015 a million British thermal units on the New York Mercantile Exchange. The benchmark contract fell by more than 5 cents Monday as forecasts called for mild temperatures across much of the U.S.
For the past two weeks, gas prices have traded in a narrow range, hewing closely to the $3 mark amid light volumes following the holiday season. Futures are at the lowest level since September, 2009.
Natural gas futures typically rally in January when cold temperatures raise demand in the more than half of U.S. homes that use the fuel for heating. But this year, warmer-than-normal weather across the country coupled with surging production has pushed stockpiles to all-time highs.
"We just do not seem to be able to generate enough space-heating or industrial demand to eat into the very heavy supplies of natural gas," said Peter Beutel, head of trading advisor Cameron Hanover, in a research report.
Weather forecaster Commodity Weather Group Tuesday predicted a burst of cold weather for the Northeast and Mid-Atlantic over the next week, which could result in more gas inventories being used in coming days. But the 11-to-15-day forecast still calls for warming in the East.
As January progresses, analysts see a closing window for cold weather that could spur a demand increase big enough for prices to recover. Still, with prices having fallen by 17% since the beginning of December, traders are cautious about whether the declines have now outpaced the demand drop.
Beutel said prices "may have already fallen below their real value."