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Natural gas futures fall. A mild winter to blame?

Natural gas futures slipped 3.8 percent Wednesday, ending a six-day rally. Analysts attribute the drop in natural gas futures to weather forecasts predicting relatively warm temperatures for the coming winter. 

By Contributor / October 3, 2012

In this 2011 file photo, a large drilling rig sits outside the Covelli Center in Youngstown, Ohio. Natural gas futures fell Wednesday amid predictions of a mild winter.

Mark Stahl/AP

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Natural gas futures slipped 3.8 percent Wednesday amid forecasts of milder weather.

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The drop comes after a six-day rally in which futures rose more than 24 percent.

Front-month November natural gas futures peaked at $3.546 per mmBtu Tuesday, the highest since December 2, 2011. The gains were driven largely by earlier forecasts of cooler weather.

But new forecasts projected milder weather ahead and cast doubt among traders Wednesday.

Temperatures will likely be above the 10- and 30-year normal ranges this winter, according to MDA EarthSat Weather. 

A warm winter means reduced heating consumption and less demand from power plants. Should the forecasts prove accurate, it would be the second consecutive winter, typically measured as December through February, to produce low energy demand.

“Traders are looking at the forecasts,” Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York, told Bloomberg Businessweek. “We’ve run out of momentum after trying to stay above $3.50. A pullback is justified here.”

By early Wednesday morning, the streak had broken. Futures dropped 11.1 cents, or more than 3 percent, to $3.42 per mmBtu. 

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