US natural gas futures fall 3pc on forecasts for less frigid weather

US natural gas futures slipped almost 3% on Tuesday on forecasts for less frigid weather and lower heating demand next week than previously expected.

That price decline came despite forecasts for temperatures to remain well below normal through at least late February, which will cause demand to break records next week.

Front-month gas futures were down 8.3 cents, or 2.9%, to $2.799 per million British thermal units at 8:08 a.m. EST (1308 GMT).

Data provider Refinitiv said output in the Lower 48 US states has averaged 90.4 billion cubic feet per day (bcfd) so far in February. Traders noted that was down from 91.0 bcfd in January, due in part to the freezing of some wells. Output hit an all-time monthly high of 95.4 bcfd in November 2019.

On a daily basis, output was on track to drop from 90.6 bcfd on Monday to 89.5 bcfd on Tuesday, the lowest since mid-November, according to preliminary data from Refinitiv that will likely be revised later in the day. Traders said wellhead freeze-offs in all producing regions were likely the cause of the daily output decline, including losses of around 0.2 bcfd in Appalachia, 0.3 bcfd in the Midcontinent, 0.1 bcfd in the Rockies, 0.l bcfd in New Mexico and 0.2 bcfd in North Dakota.

With much colder weather on the horizon, Refinitiv projected average gas demand, including exports, would jump from 133.0 bcfd this week to 148.4 bcfd next week. The forecast for next week, however, was lower than Refinitiv's 152.6-bcfd outlook on Monday.

On a daily basis, total demand was expected to reach 159.0 bcfd on Feb. 15 and 156.2 bcfd on Feb. 16, both of which would top the current record high of 150.6 bcfd on Jan. 30, 2019, according to Refinitiv. That, however, was down from Refinitiv's outlook on Monday calling for a peak of 161.2 bcfd on Feb. 15.