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NEW YORK: US natural gas futures slipped on Thursday on a smaller-than-expected storage draw last week and forecasts for less cold weather and heating demand next week than previously expected.

That price decline came even though the arctic freeze blanketing much of the country cut output by freezing wells and was expected to erase the long-standing gas storage surplus by the end of the month.

The US Energy Information Administration (EIA) forecast US utilities pulled 171 billion cubic feet (bcf) of gas from storage during the week ended Feb. 5.

That was lower than the 181-bcf draw analysts forecast in a Reuters poll and compares with a decrease of 121 bcf in the same week last year and a five-year (2016-2020) average withdrawal of 125 bcf.

Last week’s decrease cut stockpiles to 2.518 trillion cubic feet (tcf), or 6.4% above the five-year average of 2.366 tcf for this time of year.

Stockpiles have remained above the five-year (2016-2020) average since the start of 2020, but analysts say massive heating demand and liquefied natural gas exports this month should erase that surplus by the end of February.

Front-month gas futures fell 4.3 cents, or 1.5%, to settle at $2.868 per million British thermal units.

In the spot market, meanwhile, gas prices across North America soared to their highest in years as freezing wells cut output and homes and businesses cranked up their heaters to escape the arctic blast moving from Canada to the eastern half of the United States.

Data provider Refinitiv said output in the Lower 48 US states has averaged 90.0 billion cubic feet per day (bcfd) so far in February. Traders noted that was down from 91.1 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 88.9 bcfd on Wednesday to 87.2 bcfd on Thursday, the lowest since late October, according to preliminary data from Refinitiv that will likely be revised later in the day. Traders said wellhead freeze-offs in many producing regions were likely the cause of that decline, including losses of around 0.9 bcfd along the Gulf Coast, 1.0 bcfd in the Midcontinent and 0.1 bcfd in the Rockies.

With much colder weather on the horizon, Refinitiv projected average gas demand, including exports, would jump from 134.4 bcfd this week to 145.8 bcfd next week. That forecast for next week, however, was lower than Refinitiv’s outlook on Wednesday.

On a daily basis, total demand was expected to reach 153.4 bcfd on Feb. 15 and 16, which would top the current daily record high of 150.6 bcfd on Jan. 30, 2019, according to Refinitiv. Those peaks, however, were down from Refinitiv’s outlook on Wednesday calling for a high of 156.6 bcfd on February 15.—Reuters