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NEW YORK: US natural gas futures dropped 10% to a near one-month low on Monday on forecasts for milder weather resulting in lower heating demand and a steady rise in output.

Front-month gas futures fell 29.8 cents, or 9.9%, to settle at $2.697 per million British thermal units. The contract touched its lowest since Oct. 19 at $2.682 earlier in the session.

“Natural gas futures are lower this morning as supply held steady over the weekend and weather model outlook is showing a forecast that is warmer-than-normal over the next two to three weeks,” said Robert DiDona of Energy Ventures Analysis. “This warmer weather outlook has negatively impacted weather-related demand which will loosen the end of season storage forecast,” DiDona added.

Data provider Refinitiv estimated 259 heating degree days (HDDs) over the next two weeks in the Lower 48 US states, well below the 30-year average of 318. HDDs measure the number of degrees a day’s average temperature is below 65 degrees Fahrenheit (18 Celsius) and are used to estimate demand to heat homes and businesses.

Refinitiv predicted demand, including exports, would rise to an average of 104.8 billion cubic feet per day (bcfd) this week from 98.1 bcfd in the prior week.

Gas production in the Lower 48 averaged 89.4 billion cubic feet per day (bcfd) so far in November, up from a five-month low of 87.4 bcfd in October. That, however, was still well below the all-time monthly high of 95.4 bcfd in November 2019.

“Adding to bearish pressures has been a lift in production of late that has been combining with a quicker-than-expected rebound in the rig counts to exert additional psychological bearish price pressure,” advisory firm Ritterbusch and Associates said in a note.

The amount of gas flowing to US LNG export plants has averaged 10.1 bcfd so far in November, up from a five-month high of 7.7 bcfd in October. That puts exports on track to rise for a fourth month in a row as rising global gas prices prompt buyers to purchase more US gas.—Reuters