Last update: Thu, 11 Feb 2016 06pm

US natural gas futures fall three percent down on weak gas draw estimates

US natural gas futures fell 3 percent on Tuesday after the biggest rally in over a month in the previous session, as traders bet on lackluster gas demand for heating. A Reuters poll found that US utilities likely drew 38 billion cubic feet (bcf) of gas on average for the week ended December 26, way below year-ago and five-year levels.

The US Energy Information Administration (EIA) will release its weekly draw and storage data for natural gas at noon ET (1700 GMT) on Wednesday. Gas futures, which jumped 6 percent on Monday for the largest daily gain since November, fell as analysts' expectations for the EIA draw numbers came in lower than the 49 bcf announced in the prior week. Despite Monday's rally, which was fuelled by forecasts for cold weather, gas prices on the New York Mercantile Exchange have not traded far from 27-month lows hit on Friday on concern that gas in storage may be higher than levels required for heating.

Wednesday's storage data from the EIA is likely to disappoint the market with net withdrawals less than half of the 114-bcf five-year average, said Tim Evans, energy futures specialist at Citi Futures in New York. February, the new front-month contract for gas on NYMEX, settled down 10.5 cents at $3.094 per million metric British thermal units (mmBtu) after hitting a session low at $3.079. The market's previous benchmark, the January contract, expired on Monday with a gain of more than 18 cents. US weather models, tracked by Thomson Reuters Analytics and using a measure called heating degree days, indicated 520 heating degree days over the next two weeks, up from Monday's reading of 515 and versus the norm of 461 for this time of year.

Gas futures traded above $4.50 per mmBtu a month ago on colder weather across the United States. Prices collapsed after temperatures rose and gas in storage appeared higher than required. At current levels, NYMEX's front-month is down nearly 25 percent on both the month and the quarter and is due to finish the year 27 percent lower.

Copyright Reuters, 2015