NEW YORK: US natural gas futures dropped more than 2% on Friday on midday forecasts for less cold weather and less heating demand next week than previously expected.

That price decline came even though all forecasts continue to call for extreme cold in two weeks, which helped boost futures to their highest levels in 12 weeks earlier in the day.

Front-month gas futures fell 7.2 cents, or 2.5%, to settle at $2.863 per million British thermal units. Before turning negative around 1:30 p.m. EST (1830 GMT), the contract was on track for its highest close since Nov. 11.

For the week, the contract was still up about 11%, its highest weekly percentage gain since October. Last week, the contract gained almost 5%.

Data provider Refinitiv said output in the Lower 48 US states averaged 90.4 billion cubic feet per day (bcfd) so far in February. Traders noted that was down from 91.0 bcfd in January, due in part to the freezing of some wells. Output hit an all-time monthly high of 95.4 bcfd in November 2019.

With colder weather coming, Refinitiv projected average gas demand, including exports, would jump from 127.4 bcfd this week to 134.2 bcfd next week and 145.2 bcfd in two weeks. The forecast for next week, however, was lower than Refinitiv’s outlook on Thursday.

That cold blast was already moving across Alberta in Canada where next-day gas prices at the AECO hub rose to their highest since March 2019.

The long-standing “storage surplus versus the 5-year average ... (is) likely to be erased by month’s end as usage spikes,” said Jim Ritterbusch, president of Ritterbusch and Associates in Galena, Illinois.

Stockpiles have remained above the five-year (2016-2020) average since the start of 2020 and were still 7.9% above that average at the end of last week.

The amount of gas flowing to US liquefied natural gas (LNG) export plants averaged 10.7 bcfd so far in February, up from January’s 10.4 bcfd average and on track to tie December’s 10.7 bcfd record high.