Natural gas prices in the USA will drop to $2.40 per million Btu, and perhaps below $2, as gas overflows storage caverns and clogs pipelines

Hedge funds turned bearish on U.S. natural gas for the first time in eight weeks as a surplus and warmer-than-normal weather pushed the price of the heating fuel to the lowest level in more than two years.



The funds and other large speculators switched from bets that futures will rise to a bearish, or “short,” position of a net 10,344 futures equivalents in the week ended Jan. 10, according to the Commodity Futures Trading Commission’s Commitments of Traders report on Jan. 13.

Natural gas plunged 13 percent last week on the New York Mercantile Exchange, the biggest decline since August 2009, after forecasts showed above-average temperatures through January. Stockpiles in the week ended Jan. 6 stood at 3.377 trillion cubic feet, 17 percent above the five-year average, the U.S. Energy Department reported on Jan. 12.

“The funds that got short are feeling good right now,” Kyle Cooper, director of research for IAF Advisors in Houston, said in a telephone interview on Jan. 13. “As long as it stays this warm, prices have to go lower. With this type of weather, the storage surplus becomes catastrophic.”

Natural gas for February delivery fell 5.2 cents to $2.941 per million British thermal units on the Nymex in the week covered by the report and dropped another 9.2 percent to $2.67 on Jan. 13, the lowest settlement price since Sept. 3, 2009.

The contract fell for sixth day today, dropping 12.2 cents, or 4.6 percent, to $2.548 at 10:59 a.m. in New York.