US natural gas futures on Wednesday edged up to a near one-week high on forecasts for steady, colder-than-normal weather and higher heating demand into the second week of February. Front-month gas futures for February delivery on the New York Mercantile Exchange rose 5.3 cents, or 1.6 percent, to settle at $3.332 per million British thermal units. That was the third day of gains for the front-month, its longest winning streak since late December.
Overall, however, meteorologists expect January, February and March will be warmer-than-normal. Those long-term, warmer-than-normal winter forecasts have pushed several futures into contango over the past couple of weeks. The premium of March 2017 over February 2017 and the premium of April 2017 over March 2017 were both near their highest levels since the contracts started trading in 2008.
So far, the November-through-March period is on track to be slightly colder than last year's record-warm winter but hotter than the 10- and 30-year averages.
Heating degree days totaled 1,801 so far this season, versus 1,748 during the same period last winter, a 30-year average of 2,017 and a 10-year average of 1,957, according to Thomson Reuters data. Thomson Reuters projected US gas demand would fall this week from an average of 96.2 billion cubic feet per day last week to 91.5 bcfd, with temperatures expected to moderate and power usage down. It should then rise to 106.0 bcfd next week, when the weather is expected to turn cold again.
After the power sector used a record amount of gas to generate electricity last year, analysts project it will burn less in 2017 because prices of the fuel are expected to be about 25 percent higher, making coal a cheaper alternative for many generators.
Analysts forecast utilities pulled 117 billion cubic feet of gas from storage during the week ended January 20, the least for that week since 2015, due primarily to light heating demand. That compared with draws of 202 bcf a year earlier and a five-year average of 176 bcf for that week.
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