U.S. natural gas hits five-month low on milder winter forecast

(Bloomberg) --U.S. natural gas futures plunged to the lowest since July as the weather forecast for the new year shifted milder and record-high prices in Europe plunged.

Futures fell as much as 9.5% on the New York Mercantile Exchange Thursday, the most since early December. Unseasonably high temperatures are expected on the East Coast and southern U.S. through next week, dampening demand for the heating and power-plant fuel. Trading has thinned heading into the U.S. holiday weekend, raising the likelihood of sudden swings in the future market.

“A weak spot market sliding into record warmth over the long holiday weekend may add to difficulties stemming the bleeding,” EBW Analytics said in a note to clients.

Thursday’s sell-off comes after gas prices in Europe plunged 20% on expectations that a flotilla of liquefied natural gas cargoes en route from the U.S. will help to ease an energy crisis that has driven futures to record highs and shut factories. U.S. LNG export facilities have been operating at or above capacity in recent weeks and 30 tankers carrying nearly 5 million cubic meters of the fuel combined are crossing the Atlantic.

Anemic declines to U.S. gas inventories at the start of winter has underscored the market’s expectations for higher-than-normal temperatures. Utility companies and other customers drew just 55 billion cubic feet of natural gas from winter storage last week, in-line with analyst expectations but less than half the 5-year average demand for that time of year, a report released Thursday shows.

Natural gas futures traded 6.5% lower at 10:49 a.m. in New York.