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Markets

US natgas futures at 7-week low on milder weather forecasts

  • Front-month gas futures fell 6.5 cents, or 2.5%, to $2.535 per million British thermal units.
  • That puts the front-month down about 24% since mid February when it hit a three-month high of $3.316 per mmBtu during the Texas freeze.
Updated 15 Mar 2021

US natural gas futures fell to a seven-week low on Monday on forecasts for milder weather and lower heating demand through the end of March than previously expected.

Traders also noted that prices were down because that mild weather and an increase in output could cut weekly storage withdrawals to near zero this week. That would be well below the five-year (2016-2020) average decrease for the week ended March 19 of 51 billion cubic feet.

Front-month gas futures fell 6.5 cents, or 2.5%, to $2.535 per million British thermal units (mmBtu) at 9:04 a.m. EDT (1304 GMT), putting the contract on track for its lowest close since Jan. 22. On Friday, the contract closed at its lowest since Jan. 29.

That puts the front-month down about 24% since mid February when it hit a three-month high of $3.316 per mmBtu during the Texas freeze.

With all those declines in the front-month, the premium of the second-month over the front-month rose to its highest since November.

Forecasts for milder weather and lower heating demand in March prompted speculators to cut their net long positions last week on the New York Mercantile (NYMEX) and Intercontinental Exchanges by the most since December to their lowest since January.

Data provider Refinitiv said output in the Lower 48 US states averaged 90.9 billion cubic feet per day (bcfd) so far in March, up sharply from a 28-month low of 86.5 bcfd in February when extreme weather froze gas wells and pipes in Texas. That was still much lower than the all-time monthly high of 95.4 bcfd in November 2019.

Refinitiv projected average gas demand, including exports, would fall from 103.1 bcfd this week to 99.0 bcfd next week as the weather turns seasonally milder. The demand forecast for next week is lower than Refinitiv's estimate on Friday.

The amount of gas flowing to US LNG export plants, meanwhile, averaged 10.3 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.

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