Natural gas prices tumble to 14-year low

Natural gas futures haveplungedto theirlowest level in almost 14 yearsas warm weather and high inventorylevels created more misery for energy companies already struggling with collapsing oil prices.

The January futures contract slumped 13cents to an intraday low of$1.86US per million British thermal units in New York trading Monday. The January contract settled at $1.894, down 9.6 cents.That's the lowest since January 2002 and represents a drop of 35 per cent this year.

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StephenSchork, an independent analyst and trader in Villanova, Pa.,said industrial demand for natural gas in the U.S. and Canada has plunged, leaving demand from consumers who use gas to heat their homes as the only possible counterweight.But it's been unusually mild thiswinter, and that's not expected to change any time soon.

"This weather's going to persist through the rest of this month,"Schorksaid. Buthe said if January deliversthe kind of cold temperatures it normally does, priceswill recover.

The unseasonably warm weather in the U.S. midwest and northeast hascurbeddemand for natural gas at a time when the industry normally sees largesupply drawdowns as the weather cools.

New York City, for instance, broke a 92-year-old record on Sunday, postinga high of 19 C. Records were also tied or broken in Washington and in many other cities.

Storage levels high

"There's a lot of gas in storage, and production levels are still healthy," GeneMcGillian, a broker at Tradition Energy in Stamford,Conn., toldBloomberg.

"Without a turnaround in the weather, there's not much to halt this kind of price slide."

The U.S. Energy Information Administration reported last week that the amount ofnatural gas in storage fell by two per cent from the previous week to almost 3.9 trillion cubic feet.That left storage levels 15 per centabove levels of a year ago.

The price that Canadian gas producers receive has slumped along with the New York Mercantile Exchange price. At the AECO storage hub in Alberta, natural gas was trading at $2.13 Cdn per million British thermal units on Monday, down by a third from a year ago.

For energy companies struggling with sub-$35 US oil prices, the natural gas slump is compounding the misery. Oil was again trading at multi-year lowson Monday amid fears that the global crude glut would continue.

But while energy companies and investors feel the pain ofcommodity declines,homeowners who heat with natural gas are seeingtheir heating bills drop this winter. In the current quarter, for instance, Enbridge customers in Ontario are paying just over 13 cents per cubic metre for gas. In the same quarter last year, they were paying 17.7cents.