Tags: Energy | Prices | Plunge | Mild | Weather | Forecasts

Energy Prices Plunge on Mild Weather Forecasts

Tuesday, 27 December 2005 12:00 AM

NEW YORK -- Natural gas futures plunged Tuesday in thin post-Christmas trading that was influenced mainly by forecasts calling for mild weather in the Midwest and Northeast. It was the third straight decline for natural gas prices, which have fallen 23 percent since Wednesday, and the selloff triggered a decline in other energy futures.

February natural gas futures fell $1.25, or 10 percent, to $11.03 per 1,000 cubic feet in afternoon trade on the New York Mercantile Exchange. The contract reached an all-time high of $15.78 in mid-December as cold weather and predictions of snow storms raised fears about supplies.

Now, with weather forecasters calling for higher than normal temperatures over the next week, the market sentiment has shifted.

"Speculators are tripping over themselves to get out," said Ed Silliere, a Nymex floor trader at New York-based Energy Merchant Intermarket Futures.

Silliere said that if natural gas futures failed to stabilize in the next day or two, prices could easily fall below $10. "So much for $15," he said.

Light sweet crude for February delivery slipped 93 cents to $57.50 a barrel in afternoon trade on Nymex, where heating oil futures lost 5.43 cents to trade $1.651 a gallon and gasoline declined 2.80 cents to $1.5225 a gallon.

"It's all weather-related," said analyst Phil Flynn of Alaron Trading Corp. in Chicago. "Unseasonably warm temperatures here in the Midwest and elsewhere have taken the fear out of this market, at least for the near term."

Flynn said any cold snap this winter has the potential to drive prices higher.

According to Accuweather.com, temperatures in most of the United States apart from the Northwest will be higher than normal in the next six to 10 days.

Milder weather in the world's largest energy consuming nation means less heating-fuel consumption, which tends to put a downward pressure on oil prices.

Last week, the U.S. petroleum snapshot showed the supply of crude oil rose by 1.3 million barrels to 322.5 million barrels - 12 percent above year ago levels.

But U.S. inventories of distillate fuel, which include heating oil and diesel, fell by 2.8 million barrels to 127.7 million barrels. Gasoline inventories declined by 300,000 barrels to 204.1 million barrels.

Crude futures have in recent weeks been reacting to fluctuations in Northern Hemisphere temperatures, especially in the U.S. Northeast, the world's biggest heating oil market.

The price of crude is 19 percent below its all-time high of $70.85 on Aug. 30 after Hurricane Katrina made landfall.

Traders were also awaiting the midweek release of a U.S. government supply report.

In news that could affect longer term prices, OPEC, which over the past year has tried to reduce market volatility by raising or lowering production, announced that it and Russia, the largest non-OPEC oil exporter, would meet annually on the ministerial level to coordinate policies.

The announcement followed a meeting in Moscow between OPEC's outgoing president, Sheik Ahmad Fahad Al Ahmed al-Sabah and Russia's minister of industry and energy, Viktor Khristenko.

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NEW YORK -- Natural gas futures plunged Tuesday in thin post-Christmas trading that was influenced mainly by forecasts calling for mild weather in the Midwest and Northeast. It was the third straight decline for natural gas prices, which have fallen 23 percent since...
Energy,Prices,Plunge,Mild,Weather,Forecasts
497
2005-00-27
Tuesday, 27 December 2005 12:00 AM
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