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CHICAGO: U.S. natural gas futures slipped to a one-week low on Wednesday on forecasts for less cold and lower heating demand through the end of January than previously expected.

Also weighing on U.S. futures was a 7% drop in European gas prices.

The U.S. market, however, has focused on changes in U.S. weather and domestic supply and demand since the start of the New Year, rather than what is happening around the world. So far in 2022, U.S. gas has followed

European prices less than half the time versus about two-thirds of the time during the fourth quarter of 2021.

Even though the latest U.S. weather forecast called for less cold over the next two weeks, traders noted daily gas demand in the U.S. Lower 48 states was expected to reach a record high on Friday as frigid weather blankets much of the country.

That cold serves as a reminder to the market of the last time gas demand was expected to reach record highs before last winter’s February freeze.

Front-month gas futures for February delivery on the New York Mercantile Exchange fell 2.7 cents, or 0.6%, to $4.256 per million British thermal units (mmBtu) at 8:16 a.m. EST, putting the contract on track for its lowest close since Jan. 11.

During the February freeze, gas futures climbed a bit - gaining as much as 7% on Feb. 16 - but did not soar like the spot market.

Last winter, next-day gas jumped to record highs in several parts of the country - gaining over 1,100% on Feb. 12 at the Waha hub in West Texas - as Winter Storm Uri left millions without power and heat for days after freezing gas wells and pipes in Texas and other U.S. central states.

In the current spot market, frigid weather and high heating demand in the U.S. Northeast kept next-day power and gas prices in New York and New England at or near their highest since January 2018 for much of the past week. Traders noted more cold was expected later this week and next.

Lingering cold since New Year’s Day continued to depress U.S. output through well freeze-offs and other weather-related equipment issues in several regions; including the Permian in Texas and New Mexico, the Bakken in North Dakota and Appalachia in Pennsylvania, West Virginia and Ohio.

Data provider Refinitiv said output in the U.S. Lower 48 states averaged 94.5 billion cubic feet per day (bcfd) so far in January, down from a record 97.6 bcfd in December.

With even colder weather coming, Refinitiv projected average U.S. gas demand, including exports, would jump from 134.3 bcfd this week to 142.2 bcfd next week as homes and businesses crank up their heaters. Those Forecasts, however, were lower than Refinitiv projected on Tuesday.

On a daily basis, Refinitiv projected total U.S. gas demand plus exports would reach 151.7 bcfd on Jan. 21, which would top the 149.8 bcfd high seen so far this year on Jan. 7 and the current record of 150.6 bcfd on Jan. 30, 2019. The outlook for Friday was lower than Refinitiv projected on Tuesday.

During last year’s February freeze; daily demand hit 147.2 bcfd on Feb. 12, 2021, the day before winter

Storm Uri caused power and gas demand to drop as millions of consumers lost access to electricity and heat for days.

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