NEW YORK: US natural gas futures slid on Thursday on forecasts for less cold weather and lower heating demand next week than previously expected.
Traders noted that price decline also came ahead of a federal report expected to show a smaller than usual storage draw due to milder than normal weather last week.
Analysts forecast US utilities pulled just 54 billion cubic feet (bcf) of gas from storage during the week ended Dec. 31. That compares with a decline of 127 bcf in the same week last year and a five-year (2016-2020) average decline of 108 bcf.
If correct, last week’s withdrawal would reduce stockpiles to 3.172 trillion cubic feet (tcf), which would be 2.4% over the five-year average of 3.099 tcf for this time of the year.
Front-month gas futures fell 3.7 cents, or 1.0%, to $3.845 per million British thermal units (mmBtu) at 10:03 a.m. EST (1503 GMT).
Global gas prices have repeatedly soared to all-time highs over the last few months - most recently during the week before Christmas - as utilities around the world scramble for LNG cargoes to replenish low stockpiles in Europe and meet surging demand in Asia.
US futures, which followed European prices about two-thirds of the time during the fourth quarter of 2021, jumped to a 12-year high over $6 per mmBtu in early October, but have retreated since because the United States has plenty of gas in storage and ample production for winter.
Gas prices in Europe were down about 2% on Thursday but were still trading about eight times higher than US futures.
Analysts have said European inventories were about 20% below normal for this time of year, compared with about 1% above normal in the United States.
Lingering cold since New Year’s Day has continued to cause well freeze-offs and other weather-related equipment problems that reduced gas output in several regions, including the Permian in Texas and New Mexico, the Bakken in North Dakota and Appalachia in Pennsylvania, West Virginia and Ohio.
Data provider Refinitiv said average output in the US Lower 48 states slipped to 94.5 bcfd so far in January, down from a record 97.6 bcfd in December.
With seasonally colder weather coming, Refinitiv projected average US gas demand, including exports, would rise from 128.4 bcfd this week to 132.4 bcfd next week as homes and businesses crank up their heaters. The forecast for next week, however, was lower than Refinitiv’s outlook on Wednesday.
On a daily basis, total US gas demand plus exports rose to 145.5 bcfd on Monday, its highest since hitting 147.2 bcfd on Feb. 12, 2021 just before Winter Storm Uri left millions without power and heat for days after freezing gas wells and pipes in Texas and other states in the central part of the country.
With the latest weather forecasts looking less cold than earlier in the week, Refinitv does not currently expect daily gas demand will top Monday’s high during the next week or so. Total US demand hit an all-time high of 150.1 bcfd on Jan. 30, 2019.