US natgas drops 9pc on mild mid-December outlook, small storage draw

US natural gas futures dropped over 9% to an eight-week low on Thursday on forecasts for milder weather in mid-December than previously expected and a smaller-than-expected storage draw last week.

The price drop came despite record liquefied natural gas (LNG) exports.

The US Energy Information Administration (EIA) said US utilities pulled just 1 billion cubic feet (bcf) of gas from storage during the warmer-than-normal week ended Nov. 27.

That was less than the 12-bcf decline analysts forecast in a Reuters poll and compares with a decrease of 22 bcf during the same week last year and a five-year (2015-19) average withdrawal of 41 bcf.

"Today's warm shift in weather forecasts and an exceedingly bearish, marginal storage withdrawal may be the final nail in the coffin for the 2020-21 winter trade," said Daniel Myers, market analyst at Gelber & Associates in Houston.

Front-month gas futures for January delivery fell 26.7 cents, or 9.6%, to $2.513 per million British thermal units at 1:52 p.m. EST (1852 GMT), putting the contract on track for its lowest close since Oct. 2 and biggest daily percentage drop since Nov. 16.

That drop put futures for February over January for the first time since the contracts started trading in 2009.

Refinitiv said output in the Lower 48 US states averaged 91.0 billion cubic feet per day (bcfd) so far in December, flat with November's seven-month high.

Despite milder forecasts, Refinitiv projected demand, including exports would still rise from 113.4 bcfd this week to 117.3 bcfd next week due to a seasonal cooling of the weather.

The amount of gas flowing to US LNG export plants rose to an average of 10.4 bcfd so far in December, which would top November's 9.8-bcfd record.