U.S. natural gas futures sink early as forecasts turn milder

Mon Apr 1, 2013 9:34am EDT
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NEW YORK, April 1 (Reuters) - U.S. natural gas futures lost
ground in early trading on Monday, pressured by milder weather
forecasts for later this week and into next week that should
slow demand, despite a brief cold shot expected over the next
few days.
    Cold late-winter weather and above-average nuclear plant
outages helped put a huge dent in inventories and have driven 
futures prices up nearly 30 percent since mid-February.
    But with milder spring temperatures just ahead, many traders
expect prices to remain on the defensive, particularly with
production still flowing near a record peak.
    "Moderating weather forecasts and declining seasonal demand
in the coming weeks are likely to act as a brake on rising gas
prices as the month of April unfolds," Addison Armstrong at
Tradition Energy said in a report.
    Traders also noted that gas prices over $4 were likely to
slow demand by prompting utilities to use coal rather than gas
to generate power and increase supply by encouraging producers
to turn on more wells.
    At 9:10 a.m. EDT (1310 GMT), front-month gas futures 
on the New York Mercantile Exchange were down 6.2 cents, or 1.5
percent, at $3.962 per million British thermal units after
trading between $3.934 and $3.995.
    The front contract hit a 19-month high of $4.121 on Thursday
before closing lower ahead of the Good Friday holiday.
    The nearby futures contract, which posted a sixth straight
weekly gain with a 2.5 percent rise last week, ended the first
quarter up about 20 percent. The contract finished the month of
March about 15 percent higher. 
    After a brief cold spell this week, forecaster MDA Weather
Services expects warmth to build eastward, with above-normal
temperatures from the Midwest to the East seen starting late in
the week and continuing at least through mid-April.