US natural gas futures fell nearly 6 percent on Thursday on a smaller-than-expected storage draw and forecasts calling for less cold weather over the next two weeks. The US Energy Information Administration (EIA) said utilities pulled 168 billion cubic feet of gas out of storage during the cold week ended January 8. That compared with an expected 178 bcf draw in a Reuters poll and was the biggest withdrawal since last March.
After gaining half a percent on Wednesday in a light round of short covering, front-month gas futures on the New York Mercantile Exchange closed down 13 cents at $2.139 per million British thermal units. After falling over 13 percent so far this week, the front-month was on track for its biggest weekly loss since February 2014 when prices collapsed nearly 25 percent in one week.
Over the past month, gas futures have been on a roller coaster ride related to changes in the weather. The front-month fell to a 16-year low of $1.684 on December 18 on forecasts for less cold, before soaring 40 percent over the next three weeks on forecasts for more cold and then sliding 13 percent so far this week, again on forecasts for less cold.
Cheniere Energy Partners said it expects to export the first liquefied natural gas cargo from its Sabine Pass LNG project in Louisiana in late February or March. The cargo, which will be the first LNG export from the lower 48 US states, had been expected to leave port in late January. Both the US and European weather models forecast less cold, but still seasonal, weather through the end of January with next week expected to be the coldest so far this winter.
During the last week of January and the months of February and March, however, temperatures were expected to return to above normal levels, with February and March expected to be about 12 percent warmer than normal due to the effect of the El Nino weather pattern. Analysts expect utilities will continue pulling large amounts of gas from storage for the rest of January, but some warned those withdrawals may not be enough to reduce storage levels to what many call "healthy" levels below two trillion cubic feet (tcf) by the end of the heating season on March 31.
There was 3.5 tcf of gas in storage as of January 8, the highest level for that time of year in at least six years, according to federal data. Some analysts, however, believe the power sector will continue consuming near-record amounts of gas to generate electricity as the fuel remains relatively cheap compared with coal, which carries higher environmental and transport costs.