Natural-gas prices have shed 16% since hitting a 13-year high earlier this month, reversing some of a run-up that has prompted fears of exorbitant heating bills and higher manufacturing costs at a time of already high prices.
A warm start to autumn is behind the decline. With most of the country yet to turn the heat on, gas has accumulated in storage facilities faster than expected and shrunk a deficit that prompted worries over winter price surges and even potential shortages.
The forecasts that steer commodity traders call for temperatures to remain unseasonably high into November. Meanwhile, federal weather scientists said Thursday that their climate models predict a second straight winter of above-average temperatures, particularly in the South and East.
“The weather is perfect over much of the country, and perfect weather does not bode well for natural-gas demand,” said Tony Scott, vice president of energy analysis at financial-data firm FactSet. “We are quickly closing the gap on how short the gas market was.”
The U.S. Energy Information Administration said Thursday that about one-third more gas than normal was added to domestic stockpiles last week, the latest in a stretch of above-average weekly builds. Inventories that ended August 7.7% below the recent average are now just 4.2% short, according to EIA data.
Natural-gas futures ended Friday at $5.28 per million British thermal units. That is down from $6.312 on Oct. 5, which was the highest closing price since late 2008, before frackers flooded the market with shale gas.
Despite the recent decline, prices are still heading into winter higher than at any time over the past decade. Gas spent most of the past two winters trading below $3.