Forecasts for a thaw for the Eastern U.S. next month sent natural gas futures to the steepest two-day decline in more than six years on speculation of reduced demand for the heating fuel.

Gas slid 6.4 percent Tuesday as forecasters including MDA Weather Services said frigid weather in the Midwest and East through next week will ease starting March 7. Futures climbed to five- year highs this month as below-normal temperatures boosted demand, pushing U.S. stockpiles to 10-year seasonal lows. The March gas contract, representing the end of the heating season, expires Wednesday.

“The market has sold off on the expectation that the worst is behind us,” said Teri Viswanath, director of commodities strategy at BNP Paribas SA in New York. “However, given cold conditions starting tomorrow through mid-March, we think this is a premature selloff. This is nothing more than institutional investors taking profits and liquidating their March contract as we approach expiry.”

Natural gas for March delivery dropped 34.9 cents to $5.096 per million British thermal units on the New York Mercantile Exchange, the lowest settlement since Feb. 12. Volume for all contracts traded was 39 percent above the 100-day average at 2:35 p.m. Prices have climbed 20 percent this year. The more actively traded April contract was 7.1 cents higher at $4.691.

Gas Monday surged to $6.493, the highest intraday price since Dec. 2, 2008, before closing 11 percent lower. Combined with Monday’s decline, the futures dropped 17 percent in the biggest two-day percentage decline since August 2007.

Contract Spread

March gas traded 40.5 cents above the April contract, narrowing from 82.5 cents Monday. Concern that stockpiles would tumble before the end of the heating season sent the March premium to a record $1.208 on Feb. 20.

The narrowing spread and support for April contracts shows “the fundamentals are still relatively constructive” for gas prices in the coming months, Viswanath said.

March $5 puts were the most active options in electronic trading. They were 1.7 cents lower at 0.2 cent per million Btu on volume of 2,687 at 2:37 p.m. Puts accounted for 56 percent of trading volume. March options expired Tuesday.

Gas consumers in the East can expect “unrelenting cold” in the north-central states over the next five days, said MDA in Gaithersburg, Maryland. The National Weather Service has issued wind-chill advisories from Montana to Minnesota and Indiana. The combination of cold air and wind may make temperatures feel like minus 35 degrees Fahrenheit (minus 37 Celsius).

Higher Temperatures

The low temperature in Chicago on Thursday will be minus 14 degrees, 39 below normal, before rising to 28 degrees, 1 below average, on March 11, according to AccuWeather Inc. in State College, Pennsylvania. New York’s City low will go from 14 degrees, 17 lower than average, to 33, 1 below normal, during the same period.

“You had a market that was extremely long that was purely based on weather,” said John Woods, president of JJ Woods Associates and a Nymex floor trader. “I don’t think anyone was thinking they would buy $6 gas going into spring.”

Waves of polar air that stoked demand for heating fuels reduced stockpiles to 1.443 trillion cubic feet on Feb. 14, the lowest level for the time of the year since 2004, U.S. Energy Information Administration data show.

Storage levels were 34 percent below the five-year average for the week, a record deficit in data going back to 2005. Supplies also dropped to a record deficit to year-earlier levels of 40 percent.

Goldman’s View

Goldman Sachs Group Inc. cut its end-of-March inventory estimate to 1 trillion cubic feet from 1.198 trillion forecast early in the month, Samantha Dart, a London-based analyst with the bank, said in a note to clients Tuesday.

“This revision implies that instead of a modest acceleration in production growth this summer, the market now requires a more significant production response,” of about 1 billion cubic feet a day, on average, during the summer for stocks to approach 3.7 trillion by the end of October, she said.

Marketed gas output will rise an average of 1.54 billion cubic feet a day in 2014 to a record 71.76 billion, the EIA said in its monthly Short-term Energy Outlook on Feb. 11. Production is expanding as wells come online at shale deposits such as the Marcellus in the Northeast.

The need for gas during the seasonal stockpiling season, from April through October, will probably support summer prices above the marginal cost of production of $4.50 per million Btu at dry gas shale deposits, Dart said. Prices for the summer of 2015 may find temporary support at $4.50 to $5 “to allow producers to hedge appropriately” and increase gas drilling, she said.

The relative strength index, or RSI, fell to 48.5 at 2:41 p.m. from 70 on Feb. 21. A number at or above 70 may be seen as a technical sell signal while 30 may be an indicator to buy.