NEW YORK: US natural gas futures edged up about 1% on Thursday on forecasts for more demand over the next two weeks than previously expected, and as some producers said they would reduce output in 2024 after prices plunged to a 3-1/2-year low earlier this week.
That small price increase came ahead of a federal report expected to show a much smaller-than-usual storage withdrawal last week when warmer-than-normal weather kept heating demand low.
Analysts forecast US utilities pulled just 68 billion cubic feet (bcf) of gas out of storage during the week ended Feb 9. That compares with a decrease of 117 bcf in the same week last year and a five-year (2019-2023) average decline of 119 bcf for this time of year.
The combination of near-record production and mostly warmer-than-usual weather and low heating demand so far this winter, other than the Arctic freeze in mid-January, has allowed utilities to leave more gas in storage than usual. Analysts forecast inventories were currently about 15% above normal levels for this time of year.
US energy firm Antero Resources, a big gas producer, said it expects gas production to decline by about 3% in 2024 versus 2023.
Antero also said it expects to slash its drilling and completion capital budget by 26% after reducing the number of rigs in operation to two from three, and cutting one of two completion crews.
Comstock Resources, another big US gas producer, made a similar announcement about reducing gas rigs earlier this week.
“If drillers continue to announce declining production guidance and weather stabilizes natural gas may soon form a short-term bottom with an overdue relief rally possible,” analysts at energy consulting firm EBW Analytics Group said in a note. But even if some energy firms reduce gas drilling, gas output could still increase because oil prices are high enough to encourage producers to seek more oil in shale basins like the Permian in Texas and New Mexico and the Bakken in North Dakota.
A lot of associated gas also comes out of the ground with oil in those shale basins.
After falling about 23% over the past seven days, front-month gas futures for March delivery on the New York Mercantile Exchange was up 1.9 cents, or 1.2%, at $1.628 per million British thermal units (mmBtu) at 10:06 am EST (1506 GMT). On Wednesday, the contract settled at its lowest since the height of COVID demand destruction in June 2020.
Despite the small price increase, the contract remained in technically oversold territory for an eighth day in a row for the first time since February 2018.
In the spot market, gas prices at the Henry Hub benchmark in Louisiana and in Chicago fell to their lowest since October 2020.
Financial company LSEG said gas output in the US Lower 48 states rose to an average of 105.8 billion cubic feet per day (bcfd) so far in February, up from 102.1 bcfd in January, but still shy of the monthly record high of 106.3 bcfd in December.
Meteorologists projected the weather across the Lower 48 states would remain mostly warmer than normal through March 1 with next week expected to be slightly cooler than this week.
With slightly cooler weather coming, LSEG forecast US gas demand in the Lower 48, including exports, would rise from 125.1 bcfd this week to 127.7 bcfd next week. Those forecasts were higher than LSEG’s outlook on Wednesday.
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