US natural gas futures fell for a third consecutive day on Wednesday after dropping below another technical stop as the market loses faith in a cold start to the winter. The latest forecasts continued to call for mild weather and light heating demand through at least mid-November, leaving utilities with more fuel to inject into storage caverns already at record high levels for this time of year.
After falling below the 100-day moving average, a technical stop used by some traders, front-month gas futures for December delivery fell 11.0 cents, or 3.8 percent, to settle at $2.792 per million British thermal units. That put the front-month down about 10 percent over the past three days. Warmth across much of the country pushed next-day Henry Hub down to its lowest level since June, putting it about a quarter below the front-month.
The collapse in the front-month carried into forward months, with the premium of January 2017 futures over December 2016 rising to its highest since June 2011. The premium of December 2017 over December 2016 climbed to its highest on record, according to Thomson Reuters data going back to 2008. The premium of March 2017 futures over April the so-called widow-maker spread fell to its lowest on record. Traders use March as a proxy for the winter.
The calendar 2017 strip, meanwhile, fell below the psychological $3 per mmBtu level for the first time since May. The 2017 calendar strip, however, continued to trade at a premium to 2018, 2019 and 2020 because many in the market expected demand to exceed supply next year before the market rebalances in 2018. Analysts estimated inventories rose to around 3.96 trillion cubic feet (tcf) at the end of the injection season in late October and forecast they would exceed 4 tcf in November.
That would top last year's record of 3.93 tcf at the end of October and could surpass the all-time high of 4.009 tcf set in November 2015. Thomson Reuters projected US gas usage would ease to 69.0 billion cubic feet per day this week from 70.0 bcfd last week on forecasts for less heating demand before jumping to 73.4 bcfd next week, when the weather was expected to turn cooler. Gas supplies were expected to ease to 77.7 bcfd this week and 78.1 bcfd next week from 78.4 bcfd last week on lower US production and a decline in imports from Canada, Reuters data showed.
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