Natural Gas Slides to Near a Two-Year Low Unseasonably Warm December Helps Allay Concerns About Supply Shortage

By TIMOTHY PUKO WSJ

Updated Dec. 22, 2014 7:48 p.m. ET

Mild temperatures across the U.S. have sent natural-gas futures tumbling to their lowest level in nearly two years, more good news for consumers already reaping the benefits of a 30% decline in gasoline prices.

Natural-gas prices dropped 9% Monday, their largest decline since February. It extended a losing streak to three sessions since the government said gas stockpiles rose above year-ago levels for the first time in 2014.

Record U.S. oil-and-gas production, which has played a major role in driving the 48% decline in crude prices since June, is overwhelming tepid demand for home-heating fuels amid an unseasonably warm December.

Many investors who earlier this year placed bets on rising gas prices have had to reverse course and cover those bets, as strong production has now closed a stockpile shortage that had lingered for nearly a year.

As recently as November, colder-than-normal weather had traders expecting high demand and higher prices. But the warm spell has led to an about-face as investors recognize that there isn’t enough demand to absorb the record supply.

“The market was pricing in the chance for a cold winter,” said Greg Sharenow, a portfolio manager at Pacific Investment Management Co. But with warmer temperatures recently, “that price was unsustainable.”

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