US natural gas futures fell over 2% on Monday on forecasts for milder weather and lower heating demand over the next two weeks than previously expected. Front-month gas futures for March delivery on the New York Mercantile Exchange (NYMEX) fell 4.6 cents, or 2.4%, to $1.859 per million British thermal units (mmBtu) at 8:47 a.m. EST (1347 GMT).
That put the front-month on track to decline for a fourth day in a row for the first time since late January, wiping out most of the near 8% gain on February 18 when the outlook was for a much colder end to February. The sharp gain early last week - its biggest one-day percentage increase since January 2019 - caused speculators to cut their short positions on the NYMEX and Intercontinental Exchange by the most since November.
Since hitting an eight-month high of $2.905 per mmBtu in early November, futures have collapsed 36% as record production and mild weather enabled utilities to leave more gas in storage, making shortages and price spikes unlikely this winter.
Meteorologists projected weather in the Lower 48 US states will remain mostly near- to warmer-than-normal over the next two weeks, a little milder than their outlook on Friday.
Refinitiv, a data provider, projected average demand in the Lower 48, including exports, would rise from 117.7 billion cubic feet per day (bcfd) this week to 118.3 bcfd next week, lower than projections on Friday that demand would reach 120.8 bcfd this week and next.
The amount of gas expected to flow to US LNG export plants was on track to rise to 9.1 bcfd on Monday from 8.8 bcfd on Sunday, according to Refinitiv. That compares with an average of 8.5 bcfd last week and an all-time daily high of 9.5 bcfd on January 31.
Gas traders are watching flows to US LNG export plants after a few analysts projected some facilities could reduce output this summer if record low gas prices in Europe and Asia make it uneconomic for buyers to lift cargoes.
LNG prices in Europe and Asia, however, were up a bit from all-time lows hit in the past couple of weeks after the coronavirus cut demand for gas in China. Even before the virus spread, those prices had already been falling for months on mild winter weather in Europe and Asia, record gas stockpiles in Europe and reduced economic growth due to the US-China trade war. US gas producers are counting on LNG exports to continue their spectacular growth in coming years to absorb record amounts of gas associated with oil production from shale formations. LNG exports jumped 53% in 2018 and 68% in 2019, and are expected to rise 33% in 2020, according to federal energy projections.
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