US natgas futures hold at 5-week low on milder forecast

US natural gas futures held near a five-week low on Friday on forecasts for milder weather over the next two weeks than previously expected.

Traders, however, noted the weather is expected to turn slightly cooler in mid March, which should boost heating demand a bit during the week of March 14 over the week of March 7.

Front-month gas futures fell 0.8 cents, or 0.3%, to $2.738 per million British thermal units at 7:47 a.m. EST (1247 GMT), putting the contract on track for its lowest close since Jan. 29 for a second day in a row.

For the week, the front-month was down over 1% after falling almost 10% last week.

Data provider Refinitiv said output in the Lower 48 US states averaged 90.8 billion cubic feet per day (bcfd) so far in March. That compares with a 28-month low of 86.5 bcfd in February when extreme weather froze gas wells and pipes in Texas and an all-time monthly high of 95.4 bcfd in November 2019.

Refinitiv projected average gas demand, including exports, would drop from 112.3 bcfd this week to 104.9 bcfd next week as the weather turns seasonally milder before edging up to 105.1 bcfd in two weeks.

The amount of gas flowing to US LNG export plants, meanwhile, averaged 10.2 bcfd so far in March. That compares with a four-month low of 8.5 bcfd in February as extreme cold cut power and gas supplies to the facilities, and a monthly record high of 10.7 bcfd in December.

Buyers around the world continue to purchase near record amounts of US gas because prices in Europe and Asia remain high enough to cover the cost of shipping the US fuel across the oceans.

Traders, however, noted US LNG exports cannot rise much more until new units enter service in 2022 since the United States has the capacity to export only about 10.5 bcfd of gas as LNG. LNG plants can pull in a little more gas than they can export since they use some of the fuel to run the facility.