US natural gas futures fall on less heating demand

US natural gas futures fell on Tuesday on forecasts for less heating demand over the next two weeks than previously expected, while output rises to near record levels. Front-month gas futures fell 7.1 cents, or 2.2 percent, to settle at $3.129 per million British thermal units.
That decline followed a 10 percent gain over the prior two trading days last week before the Martin Luther King Jr Day holiday on Monday when the forecasts were for colder weather. Thomson Reuters analysts on Tuesday cut their forecast for gas demand in the lower 48 US states for next week to 109.9 billion cubic feet per day from 111.8 bcfd on Friday before the US Martin Luther King Jr. Day holiday on expectations for warmer weather. That compares with a projected 126.2 bcfd during the colder weather this week.
Included in the consumption outlook are US exports to Mexico and Canada via pipeline and the rest of the world as liquefied natural gas. US sales abroad are projected to average 9.7 bcfd this week, up 14 percent from a year earlier. As temperatures warm, allowing freezing wells to return to service, Thomson Reuters projected production in the lower 48 US states would increase to 75.1 bcfd on Tuesday from as low as 71.1 bcfd on January 1 when the cold reduced output by as much as 8 percent from the record high of 77.6 bcfd on December 18.
Analysts said utilities likely pulled 202 billion cubic feet of gas from storage during the week ended January 12, after removing a record 359 bcf out during the prior week ended January 5. That compares with a decline of 230 bcf during the same week a year earlier and a five-year average decrease of 203 bcf.
If correct, the latest decline would cut stockpiles to 2.565 trillion cubic feet, 12.9 percent below the 2.946 tcf five-year average for this time of year and the lowest total gas in storage for that week since 2014. Traders, however, said supplies were still adequate to meet heating demand for the rest of the winter, especially if production returns to record highs and the latest weather forecasts for the rest of the season are correct.
Despite the brutal freeze at the start of the year, the National Weather Service (NWS) has forecast that US temperatures will remain mostly seasonal for the rest of the winter. The NWS projected heating degree days (HDDs) would total 1,569 during in January and February. That compares with just 1,314 HDDs during the same period in the unusually warm winter of 2017 and a 10-year average of 1,598. HDDs measure the number of degrees a day's average temperature is below 65 degrees Fahrenheit (18 Celsius). The measure is used to estimate demand to heat homes and businesses.