US natural gas futures on Wednesday settled up over 8 percent and soared over 10 percent post settlement on long-range forecasts for a colder-than-normal January despite an expected warmer-than-normal end to 2016. After falling for four straight days and settling at its lowest level since November on Tuesday, front-month gas futures on Wednesday rose 27.9 cents, or 8.6 percent, to settle at $3.542 per million British thermal units, its highest close since December 9.
The front-month continued to climb after the close, rising over 10 percent to a high of $3.593 per mmBtu, its highest intraday trade since December 12. That was its biggest daily percentage gain since late October. The front-month has had a volatile run for the past several weeks on changes in winter forecasts. It dropped 9 percent last week on warmer forecasts after soaring 43 percent over the prior four weeks on a colder outlook.
The longer term, the latest weather models project colder-than-normal temperatures in January, a near-normal February and a warmer-than-normal March. Earlier in the week, the weather models projected near-normal temperatures in both January and February. Thomson Reuters projected the cold start to this week would boost US gas demand to 112.5 billion cubic feet per day (bcfd), the most since February, from an average of 108.3 bcfd last week, before falling to 96.9 bcfd during the last week of the year when temperatures are expected to moderate.
Analysts said utilities likely pulled 201 bcf of gas from storage during the colder-than-normal week ended December 16, the most for that week since at least 1994. That compares with declines of 147 bcf in the prior week, 33 bcf in the same week a year ago and a five-year average decline of 101 bcf for that week.
Analysts forecast the amount of gas in storage would fall below weekly five-year averages by year-end for the first time since May 2015, especially with US production stuck at its lowest level for this time of year since 2013. US production averaged 70.8 bcfd for the past 30 days, compared with 73.5 bcfd during the same period in 2015, 72.6 bcfd in 2014 and 66.7 bcfd in 2013, according to Reuters data.
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