NEW YORK: US natural gas futures extended declines to shed 7% on Tuesday, hurtling toward their worst month in about three years as forecasts for a milder December dampened the demand outlook for the fuel used to heat homes and businesses.
US front-month gas futures had dropped 30 cents or 6.2% to $4.555 per million British thermal units (mmBtu) by 8:57 a.m. EST (1357 GMT), after falling 7.1% to a trough since Sept. 1. “It’s really about weather and forecasts that have turned much milder for December,” said Phil Flynn, senior analyst at Price Futures Group in Chicago.
“A week ago, there was some talk about a polar vortex that could come in and make December colder, but because forecasts have changed, the market has taken it on the chin here, two days in a row.”
For the month, the contract was down about 16%, its worst since Dec. 2018, erasing gains from an initial rally to over $6 per mmBtu.
Data provider Refinitiv projected 310 heating degree days (HDDs) over the next two weeks compared with a 30-year normal of 370 HDDs for the period.
HDDs, used to estimate demand to heat homes and businesses, measure the number of degrees a day’s average temperature is below 65 degrees Fahrenheit (18 degrees Celsius).
Preliminary data from Refinitiv showed output in the US Lower 48 states averaged 96.5 billion cubic feet per day (bcfd) in November, up from 94.1 bcfd in October, and compared with a monthly record of 95.4 bcfd set in November 2019.
Refinitiv forecast average US gas demand, including exports, to rise slightly from 111.5 bcfd this week to 115.6 bcfd next week, but this was still lower than Monday’s projections.