US natural gas futures jump on heating demand

US natural gas futures jumped 5 percent on Tuesday ahead of expiration of the December contract on forecasts for more heating demand next week than previously projected. Gas futures have been on a roller-coaster ride since the US Thanksgiving Day holiday on Thursday due to changing weather forecasts. On Friday, the front month dropped 5 percent, its biggest daily percentage decline since February, before jumping 4 percent on Monday.
On its last day as the front month, gas futures for December delivery rose 14.6 cents, or 5 percent, to settle at $3.074 per million British thermal units, its highest close since Nov. 17. That increase in the December contract cut the premium of the soon-to-be front-month January future over December to its lowest on record, according to Reuters data going back to 2008.
The January contract also increased on Tuesday but only by about 11 cents to around $3.13. Thomson Reuters boosted its projection for next week's US gas consumption to an average of 95.2 billion cubic feet per day from a previous estimate of 92.3 bcfd as forecasts for colder weather pushed up heating demand expectations.
That compares with forecast usage of just 86.5 bcfd 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 expected to average 10.2 bcfd this week, up 31 percent from the same week a year ago.
Production in the lower 48 US states needed to meet that demand averaged an all-time high 76.0 bcfd over the past 30 days, according to Reuters data. Output peaked on Monday at a daily high of 76.9 bcfd. Analysts said utilities likely pulled just 37 billion cubic feet of gas from storage during the week ended Nov. 24, the smallest draw for that week since 2013. That compares with a year-earlier withdrawal of 43 bcf and a five-year average decrease of 47 bcf for that period.
If correct, the projected weekly decline will leave stocks around 3.689 trillion cubic feet, or about 2.9 percent below the 3.800 tcf five-year average for this time of year.