NEW YORK (Dow Jones)--Natural gas futures fell Friday as slightly warmer weather forecasts hit demand expectations for the heating fuel.
Natural gas for January delivery settled down 1.8 cents, or 0.4%, at $4.417 a million British thermal units on the New York Mercantile Exchange. The benchmark contract climbed for five of the first six sessions in December, as colder weather forecast for the eastern U.S. boosted the gas-heating demand outlook. But futures have settled lower for two consecutive days as traders cashed out to profit from the market's advances amid slightly warmer weather forecasts.
"Today's 11-15 day forecast is a shade warmer over the north-central U.S. than it was yesterday," meteorologists with private forecaster WSI Corp. said Friday. Forecasters see near-average temperatures for some major heating markets in the Midwest and Northeast Dec. 21-25, with below-normal temperatures generally limited to parts of the Northwest and Southeast.
But the cold spell that has settled over much of the U.S. could persist into January, said Dan Leonard, a senior meteorologist with WSI. "The consensus forecast by energy forecasters for a warm winter may be in trouble," Leonard said.
Futures ended lower Thursday after a weekly decline in gas stockpiles wasn't enough to ease the concerns about abundant supplies.
"The market was hoping for a bigger drop," said Jimmy Tintle, a broker and analyst with Transworld Futures. He said some of Thursday's selling carried through to Friday as traders cashed out to profit from gains made earlier in the week.
The U.S. Energy Information Administration said Thursday the amount of natural gas in storage fell by 89 billion cubic feet during the week ended Dec. 3, slightly more than consensus estimates of an 84-bcf decline.
Even with the drawdown, supplies last week stood at 3.725 trillion cubic feet, 9.8% higher than the five-year average for this time of year, according to the government agency. Supplies are widely seen meeting the needs of even an unusually cold winter.
Citing the persistent oversupply, UBS Friday cut its 2011 Nymex natural gas price forecast, to $4.40/MMBtu, from the $4.90/MMBtu previously expected.
Meanwhile, the number of rigs drilling for natural gas fell by 13 this week, to 948, according to oil-field services company Baker Hughes Inc. (BHI). The gas rig count is up by about 25% from the same week last year as producers continue to exploit natural gas-bearing rock formations known as shales.