US natural gas futures slipped on Thursday ahead of a federal report expected to show the latest storage draw was much smaller than usual due to mild weather and lower heating demand last week.
That price decline came even though liquefied natural gas (LNG) exports remain on track to hit record highs and the latest forecasts called for slightly cooler weather over the next two weeks than previously expected. Those lower temperatures, however, were still projected to be warmer than normal for this time of year.
Analysts forecast US utilities pulled just 17 billion cubic feet (bcf) of gas from storage during the week ended March 12. That compares with a decrease of 15 bcf in the same week last year and a five-year (2016-2020) average withdrawal of 59 bcf.
If correct, last week's decrease would cut stockpiles to 1.776 trillion cubic feet (tcf), which would be 5.3% below the five-year average of 1.875 tcf for this time of year.
Front-month gas futures fell 3 cents, or 1.2%, to $2.498 per million British thermal units at 8:56 a.m. EDT (1256 GMT).
That puts the front-month down about 25% since mid February when it hit a three-month high of $3.316 per mmBtu during the Texas freeze.
Analysts noted futures have been under pressure in recent weeks as falling demand and rising output reduce weekly storage withdrawals. Some analysts think utilities could start adding to storage before the end of the month. That compares with five-year average decreases of 51 bcf for the week ended March 19 and 24 bcf for the week ended March 26.
Data provider Refinitiv said output in the Lower 48 US states averaged 91.0 billion cubic feet per day (bcfd) so far in March, up sharply from a 28-month low of 86.5 bcfd in February, when extreme weather froze gas wells and pipes in Texas. That, however, was still much lower than the record monthly high of 95.4 bcfd in November 2019.
Refinitiv projected average gas demand, including exports, would fall from 104.9 bcfd this week to 100.0 bcfd next week as the weather turns milder. That, however, was higher than Refinitiv forecast on Wednesday.
The amount of gas flowing to US LNG export plants, meanwhile, has averaged 10.4 bcfd so far in March. That compares with a four-month low of 8.5 bcfd in February, when extreme cold cut power and gas supplies to the facilities, and a monthly record high of 10.7 bcfd in December.
On a daily basis, feedgas to LNG export plants was on track to rise to 11.4 bcfd on Thursday, which would top the daily record of 11.3 bcfd hit in mid-December, preliminary Refinitiv data shows.