US natgas futures slide to 4-week low on milder weather, rising output

US natural gas futures slipped to a four-week low on Friday on forecasts for the weather to keep turning milder through mid March allowing more production to return from last week's freeze and heating demand to decline.

Daily output jumped to its highest in almost a year on Thursday, according to data provider Refinitiv.

Front-month gas futures fell 4.8 cents, or 1.7%, to $2.729 per million British thermal units at 9:24 a.m. EST (1424 GMT), putting the contract on track for its lowest close since Jan. 29 for a second day in a row.

That puts the front-month down for a seventh consecutive day the first time since October 2019, when prices fell for a record 12 days in a row.

For the week, the contract was down almost 12% after rising around 5% last week. For the month, however, it was still up about 6% after gaining 1% in January.

At-the-money implied volatility for futures, a determinant of an option's premium, fell to 32.8%, its lowest since July 2019.

Refinitiv said output in the Lower 48 US states has averaged 86.1 billion cubic feet per day (bcfd) so far in February. Traders noted that was down from 91.1 bcfd in January, due to massive freezing of wells and pipelines last week. Output hit an all-time monthly high of 95.4 bcfd in November 2019.

On a daily basis, however, production jumped to 93.8 bcfd on Thursday as the weather warms, its highest since March 2020. During last week's freeze, daily production dropped as low as 72.9 bcfd on Feb. 17, the lowest since August 2017, according to Refinitiv data.

Refinitiv projected average gas demand, including exports, would drop from 116.4 bcfd this week to 106.2 bcfd next week and 98.8 bcfd in two weeks as the weather turns milder.

The amount of gas flowing to US LNG export plants averaged 8.4 bcfd so far in February, down from 10.4 bcfd in January and a monthly record high of 10.7 bcfd in December.

Gas flows were down for the month after several Gulf Coast plants shut or reduced output because the extreme cold last week cut available power and gas supplies. Flows, however, have increased this week at Cameron in Louisiana and Freeport and Corpus Christi in Texas. Traders noted Sabine Pass in Louisiana was still receiving lower amounts of gas due to fog this week.