US natgas futures fall over 5pc on above normal weather outlook

NEW YORK: US natural gas futures fell over 5 percent on Tuesday, pressured by forecasts of above normal temperatures next week, though the market was set for a second consecutive yearly gain led by record gas flows to liquefied natural gas export plants.

Front-month gas futures for February delivery on the New York Mercantile Exchange traded 20.3 cents lower, or 5.1 percent, to USD3.77 per million British thermal units. The contract was up over 4 percent so far this year.

“The weather factor continues to dominate near-term price direction and with latest updates to the 1–2-week forecasts, some further price pressure would appear likely,” consultancy Ritterbusch & Associates said in a note.

“Although this week’s cold temperatures prompted significant support at the beginning of this week, focus has shifted to next week where above normal temperatures are generally expected across most of the US”

Meteorologists forecast above normal temperatures nationwide through January 14, with Heating Degree Days falling from 439 on Tuesday to 413 on Wednesday. HDDs measure energy demand to heat buildings.

Financial firm LSEG projected average gas demand in the lower 48 states, including exports, would edge lower from 137.8 bcfd this week to 134.5 bcfd next week, below its Tuesday’s projection.

The contract was down ahead of a federal storage report later in the day, which is expected to show US energy firms likely pulled a smaller-than-usual 50 billion cubic feet of natural gas from storage last week.

That figure would be less than half the draw of 112 bcf during the same week a year ago and a five-year average draw of 120 bcf for this time of year.

Earlier this month, the Energy Information Administration projected in its Short-Term Energy Outlook that dry gas production will rise to 109.1 bcfd in 2026. That compares with a record 103.6 bcfd in 2023. Analysts expect natural gas prices to be supported in 2026, owing to increased demand for electrification and gas-fired plants.

“Our view for 2026 and beyond is kind of two-fold,” said Robert DiDona, president of Energy Ventures Analysis. “One is that we see healthy power generation coming from the gas-fired sector to support the electric demand growth, and two is we’re about to hit the next wave of the LNG boom.”