US natural gas futures climbed over 2 percent on Tuesday after the front-month rolled to the higher-priced January contract despite forecasts for steady, near-normal temperatures over the next two weeks. On its first day as the front-month, January futures on the New York Mercantile Exchange gained 8.3 cents, or 2.6 percent, to settle at $3.315 per million British thermal units.
Earlier Tuesday, the contract hit $3.367, its highest since December 2014. That put the front-month up for a seventh day in a row, its longest winning streak since November 2014, gaining almost 23 percent during that time. With gas futures now 50 percent higher than a year ago, generators were burning more coal to produce electricity. Over the next two weeks, the power sector was expected to burn 21.5 billion cubic feet of gas per day (bcfd) versus 24.4 bcfd during the same period last year, Thomson Reuters data showed.
Overall, US gas usage was expected to ease to an average of 83.8 bcfd this week, with mild weather forecast, from 87.5 bcfd last week, before rising to 93.2 bcfd next week when the weather is expected to turn much colder, the data showed. Usage includes US demand, liquefied natural gas exports and deliveries to Mexico.
Gas supplies, meanwhile, were projected to hold at around 78.5 bcfd over the next two weeks, the same as last week, data showed. Supplies include US production and Canadian imports. With demand exceeding supply, analysts projected utilities pulled around 56 bcf of gas from storage during the week ended November 25, the second draw of the winter heating season.
Stockpiles, which have been at record highs since April, were expected to fall below year-ago levels in the coming weeks if forecasts for near-normal cold in December, January and February prove correct, especially with US production for this time of year stuck at its lowest since 2013.
US production averaged 70.9 bcfd over the past 30 days, compared with 73.1 bcfd during the same period in 2015, 72.0 bcfd in 2014 and 67.4 bcfd in 2013. Output, however, has increased in recent weeks, rising to an average of 71.2 bcfd over the past seven days. Drillers have pulled more gas out of the Marcellus and Utica shale basins in Pennsylvania, Ohio and West Virginia since prices there rose to their highest since March.