U.S. gas prices stumble on mild start to winter

By John Kemp

LONDON (Reuters) - U.S. natural gas prices have tumbled since the start of November as persistent mild weather has caused inventories to remain high rather than drawing down in line with seasonal trends.

Futures prices for gas delivered to Henry Hub in January 2021 have fallen to just over $2.40 per million British thermal units, down from almost $3.50 at the end of October.

And the six-month calendar spread between futures contracts with deliveries in January and July has slumped into a contango (forward prices above spot prices) of almost 13 cents, from a backwardation (spot above forwards) of over 40 cents.

Lower futures prices will encourage maximum gas burn by U.S. power producers, mostly at the expense of coal, while the contango will pay for higher stocks to be carried over until next summer.

The Lower 48 states are now roughly a quarter of the way through the winter heating season, based on average population-weighted heating demand over three decades between 1981 and 2010.

So far this heating season, temperatures across the Lower 48 have been warmer than normal, and heating demand has been 12% below the long-term average, according to the Climate Prediction Center.

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