US natural gas futures traded within a few cents of unchanged on Monday after rising earlier in the day with an increase in the crude market and forecasts for colder-than-previously expected weather in late January.
Meteorologists projected temperatures in the US Lower 48 states will fall from mostly warmer-than-normal levels now to colder-than-usual for a few days starting around Jan. 16 before rising again on Jan. 19. That forecast is a little cooler than Friday's mostly warmer-than-normal to normal outlook for the same period.
Front-month gas futures for February delivery on the New York Mercantile Exchange were up 1.1 cents, or 0.5%, at $2.141 per million British thermal units (mmBtu) at 10:32 a.m. EST (1532 GMT).
US crude futures jumped to their highest since April early on Monday as rhetoric from the United States, Iran and Iraq fanned tensions in the Middle East after a US air strike killed a top Iranian military commander.
The jump in oil and recent declines in gas boosted the oil-to-gas ratio to 29:1, its highest since September 2013.
Traders noted gas prices have dropped about 26% since hitting an eight-month high of $2.905 per mmBtu in early November due to milder-than-usual weather and expectations inventories will rise over the five-year average as near-record production enables utilities to leave more gas in storage, wiping away lingering concerns of supply shortages and price spikes later this winter.
The premium of gas futures for February over March, meanwhile, fell to its lowest on record, according to Refinitiv data going back to 2008, when the contracts started trading.
Analysts said utilities likely pulled just 60 billion cubic feet (bcf) of gas from storage during the week ended Jan. 3. That compares with a decline of 91 bcf during the same week last year and a five-year (2015-19) average reduction of about 169 bcf for the period.
If correct, the decrease for the week ended Jan. 3 would cut stockpiles to 3.132 trillion cubic feet (tcf), 2.3% above the five-year average of around 3.061 tcf for this time of year.
Gas production in the Lower 48 states held at 95.4 billion cubic feet per day on Sunday, the same as Saturday, according to Refinitiv. That compares with an average of 95.4 bcfd last week and a record high of 96.8 bcfd on November 30.
With the seasonal cooling, Refinitiv predicted demand in the Lower 48 states, including exports, would rise from an average of 117.4 bcfd this week to 118.3 bcfd next week. That, however, is much lower than Refinitiv's forecasts on Friday of 119.2 bcfd for this week and 124.0 bcfd for next week.
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