US natural gas futures fall

US natural gas futures on Tuesday dropped to a three-week low, falling by almost 11 percent from last week's high, on forecasts for warmer-than-normal weather through mid-February. Meteorologists forecast those moderate temperatures would last through the end of March.
Front-month gas futures for March delivery on the New York Mercantile Exchange fell 11.5 cents, or 3.6 percent, to settle at $3.117 per million British thermal units, its lowest close since January 9 After rising about 30 percent during the past five months, the front month lost about 16 percent in January, its biggest monthly decline since February.
So far, the November-through-March period is on track to be slightly colder than last year's record-warm winter but hotter than the 10- and 30-year averages. Heating degree days totaled 1,955 so far this season, versus 1,891 during the same period last winter, a 30-year average of 2,186 and a 10-year average of 2,125, according to Thomson Reuters data.
Looking ahead, those warmer-than-normal winter forecasts pushed futures into contango through August with the premium of April 2017 over March 2017 rising to its highest level since the contracts started trading in 2008, while the premium of March 2018 over March 2017 rose to its highest since January 2012. Thomson Reuters projected US gas demand will rise to 101.4 billion cubic feet per day (bcfd) this week before easing to 98.8 bcfd next week from 90.6 bcfd during the warmer-than-normal weather last week.
Analysts said utilities likely pulled about 85 billion cubic feet of gas from storage during the week ended on January 27, the least for that week since 1999. That compared with withdrawals of 169 bcf a year earlier and the five-year average of 166 bcf for that week.
Analysts said they expected the amount of gas in storage to decline faster than normal this year despite weaker power demand for the fuel, in part because exports are higher and production is lower. After the power sector used a record amount of gas to generate electricity last year, analysts projected it will burn less in 2017 because prices of the fuel are expected to be about 25 percent higher, making coal a cheaper alternative for many generators.US production averaged 70.4 bcfd over the past 30 days, compared with 73.2 bcfd a year earlier and 72.2 bcfd for the same period in 2015, according to Reuters data.