US natural gas futures was little changed on Thursday as a bigger-than-expected weekly storage draw and forecasts for cold weather during the first week of 2018 erased big losses earlier in the day. The front-month fell to its lowest level in almost ten months earlier Thursday because production is at a record high and the latest weather forecasts for next week call for less cold and heating demand than previously expected.
The US Energy Information Administration (EIA) said utilities pulled 182 billion cubic feet of gas from storage during the colder-than-normal week ended on December 15. That topped the 170 bcf analysts estimated in a Reuters poll and compares with a decline of 200 bcf during the same week a year ago and a five-year average decrease of 125 bcf for that period. The decline cut stockpiles to 3.444 trillion cubic feet, 2.4 percent below the 3.528 tcf five-year average for this time of year.
Front-month gas futures was up 0.8 cents, or 0.3 percent, at $2.645 per million British thermal units at 10:50 am EST (1550 GMT). Earlier Thursday, the contract traded at its lowest level since February 22. In the minutes before EIA released the storage report, however, the front-month was flat. Prices have been trending toward new lows for most of December on moderating winter weather forecasts, record production and storage near normal levels.
Traders noted gas prices earlier Thursday were now so low that it was almost less expensive for some generators to burn gas instead of Western coal, which has always been cheaper than gas, at least according to Reuters data going back to 2007.
The 12-month futures strip was at its lowest level since May 2016. Next-day power and gas in New England, meanwhile, climbed to their highest since last winter on forecasts for a couple days of bitter cold in the region. Temperatures in Boston, the biggest city in New England, were expected to top out in the low 30s F (around 1 degree C) on Thursday and Friday, according to meteorologists at AccuWeather.
Thomson Reuters analysts projected US gas consumption would top 125 billion cubic feet per day during the first week of 2018 as cold weather blankets much of the country.
For next week, however, the Reuters data showed gas usage would drop to an average of 113.6 bcfd from Wednesday's forecast of 117.9 bcfd. That compares with expected usage of 102.1 bcfd during the mild weather this week. Included in the consumption projections are US exports to Mexico and Canada via pipeline and the rest of the world as liquefied natural gas. US sales abroad were projected to average 10.5 bcfd this week, up 40 percent from a year earlier.
Production in the lower 48 US states averaged an all-time high of 76.5 bcfd over the past 30 days, according to Reuters data. Daily output peaked at the end of November at 77.2 bcfd earlier this week. Even though the amount of gas in storage is a little less than usual for this time of year, traders said there was more than enough fuel to meet heating demand this winter, especially if production remains near record highs and the latest weather forecasts for the full season are correct.
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