2014.02.2506:26:30UTC+00Natural gas slips most in six years on tender weather forecast

Natural gas futures slumped the most in six years in New York, as meteorologists expected milder weather that could trim down demand for the heating fuel following a polar blast this week.

Gas slipped 11%, the largest fall since August 20, 2007, after touching a five-year peak in intraday trading. A midday update to the National Weather Service’s Global Forecast System model displayed higher temperatures than previously foreseen in the Midwest from March 6 to March 10. Tomorrow is the last trading day for March options.

Futures have surged 29% this year, the largest gainer after coffee on the Standard & Poor’s GSCI Index of 24 commodities. Cold weather and winter storms have exhausted gas stockpiles to the lowest since 2004. Hedge funds inflated bullish bets on natural gas for the fifth time in six weeks, according to the Commodity Futures Trading Commission February 21 report.

Natural gas to be delivered in March tumbled 69 cents to $5.445 per million British thermal units on the New York Mercantile Exchange. The price touched $6.493 in intraday trading, the highest since December 2, 2008. Volume was 54% above the average at 2:36 p.m. March gas listed 82.5 cents over the April contract, as compared to $1.123 on Feb. 21.

Volatility Rises

March $6 calls were the most active options in electronic trading. They were 29.9 cents lesser at 2.4 cents per million Btu on volume of 3,479 at 2:36 p.m. Calls reported for 69% of trading volume. Inferred volatility for April at the money options was 48.55% at 2:36 p.m., as compared to 32.05% last year for April 2013 options.

Money managers’ net-long natural gas positions, or wagers on rising prices, leaped 5% in the seven days ended February 18, the most since May, as seen in CFTC data.