Natural gas futures tumbled the most in six years on Monday as meteorologists predicted that milder weather would reduce demand for the heating fuel after a polar blast this week.
Gas slid 11 percent, the biggest drop since Aug. 20, 2007, after reaching a five-year high as a midday update to the National Weather Service’s Global Forecast System model showed higher temperatures than previously forecast March 6-10 in the Midwest.
Natural gas for March delivery slumped 69 cents to settle at $5.45 per million British thermal units on the New York Mercantile Exchange. The price reached $6.49 in intraday trading, the highest level since Dec. 2, 2008.
Futures prices had rallied 29 percent this year as cold weather and winter storms have depleted gas stockpiles to the lowest level since 2004.
“There’s always downside risk with a change to milder weather,” said Tom Saal, senior vice president of energy trading at FCStone Latin America LLC in Miami. “This is a weather-based market and we’re getting closer to spring.”
Money managers’ net-long natural gas positions, or wagers on rising prices, jumped 5 percent in the seven days ended Feb. 18, to the highest level since May, data from the Commodity Futures Trading Commission show.
“This selloff appears to be the result of the liquidation of long positions ahead of the options expiration,” said Teri Viswanath, the director of commodities strategy at BNP Paribas SA in New York. Todayis the last trading day for the March options.
The low in Kansas City, Kansas, on March 9 may be 35 degrees, 2 degrees above normal, according to AccuWeather Inc. About 49 percent of U.S. households use gas for heating, according to the Energy Information Administration.
Gas stockpiles totaled 1.443 trillion cubic feet in the week ended Feb. 14, the least for that period since 2004, EIA data show. Supplies were at a record deficit of 34 percent to the five-year average.