Market Insider

Natural gas plunges on warmer weather forecasts

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Natural gas was the worst performing commodity by far Monday, plunging more than 2.5 percent in heavy volume to the lowest price in more than five weeks.

December natural gas futures hit a session low of $3.406 per million British thermal units , as forecasts for above-normal temperatures and limited heating demands across much of the country in the coming weeks are depressing the market.

Despite Monday's colder temperartures in the east, the National Weather Service's six- to 10-day forecast shows warmer than normal temperatures are expected across most of the U.S. The west coast is expected to continue to be cooler than normal.

Natural gas plunges to five-week low

"A lack of early cold, in combination with near if not new record highs in dry gas production, plus more than ample supplies of gas in storage have dragged prices back to within a penny of September's prompt gas contract low at $3.400," according to analysts at Tradition Energy.

"But the fast-approaching start of winter and increasing levels of coal-to-gas switching as power generators ramp up their gas-fired power plants to take advantage of low gas prices should provide support for the market."

Natural gas lost 3 percent last week in its third consecutive weekly loss. The lows of this year came in the beginning of January, when natural gas was trading at $3.05, and the high was set in April when cold spring weather sent futures to $4.44.

Temperatures are chilly in the northeast, expected five to 15 degrees below average Monday, but they moderate to near average Tuesday, according to the Weather Channel.

—By CNBC's Sharon Epperson. Follow her on Twitter: