US natgas falls over 5pc on milder weather, lower demand forecasts

US natural gas futures fell over 5% to a one-week low 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 fell 16.1 cents, or 5.3%, to $2.908 per million British thermal units at 10:15 a.m. EST (1515 GMT), putting the contract on track for its lowest close since Feb. 11.

That puts futures down for a third day in a row after hitting a three-month high of $3.316 per mmBtu on Feb. 17. Traders said that's because the market expected last week's extreme weather would be a short-term event that would not drag into March.

In the spot market, prices at several hubs also dropped as the weather turns milder after soaring to all-time highs last week.

Next-day gas at the Henry Hub benchmark in Louisiana fell to just $4.96 per mmBtu for Monday after hitting a record $23.86 last week.

Gas at the Waha hub in the Permian basin in West Texas dropped to $4.25 from a record high of more than $209 last week as extreme cold in the central United States caused gas wells and pipes to freeze and power plants to shut, leaving millions without power for days in Texas and elsewhere.

Last week's weather prompted speculators to boost net long positions on the New York Mercantile (NYMEX) and Intercontinental Exchanges for a fourth week in a row to their highest since October.

Data provider Refinitiv said output in the Lower 48 US states has averaged 84.9 billion cubic feet per day (bcfd) so far in February. Traders noted that was down from 91.1 bcfd in January, due to freezing wells and pipes. Output hit an all-time monthly high of 95.4 bcfd in November 2019.

On a daily basis, however, output rose as temperatures climbed to 84.7 bcfd on Sunday from just 72.9 bcfd on Feb. 17, the lowest since August 2017, Refinitiv data showed.

Refinitiv projected average gas demand, including exports, would drop from 117.8 bcfd this week to 107.7 bcfd next week as the weather turns milder. That is lower than Refinitiv projected on Friday and well below last week's average of 143.7 bcfd.