US natural gas futures rise on cooler weather

US natural gas futures on Thursday edged up to their highest level in a week on forecasts for slightly cooler, but still warmer-than-normal weather over the next two weeks. That move higher came despite a government report showing a smaller-than-expected weekly storage draw.
The US Energy Information Administration said utilities pulled 147 billion cubic feet of gas from storage during the cold week ended on February 3, the most for that week since 2015. EIA said that draw did not include a reclassification of five bcf of working gas to base gas.
The draw fell short of the analysts' consensus estimate for a decline of 153 bcf and compared with withdrawals of 93 bcf in the same week a year earlier and the five-year average of 138 bcf for that week. Front-month gas futures rose 1.5 cents, or 0.5 percent, to settle at $3.141 per million British thermal units, its highest close since February 2.
In the Northeast, next-day gas prices for Friday in New York and New England surged to their highest levels in over a month as a major winter storm drops up to a foot (30.5 cm) of snow from New York City to Boston. Looking forward, however, weather models project temperatures will mostly remain warmer than normal for the rest of the winter.
So far, the November-through-March period is on track to be slightly colder than last year's record-warm winter but warmer than the 10- and 30-year averages. Heating degree days have totalled 2,158 so far this season, versus 2,100 during the same period last winter, a 30-year average of 2,433 and a 10-year average of 2,371, according to Thomson Reuters data.
US gas demand will slide to 96.5 billion cubic feet per day this week and 92.7 bcfd next week from 100.7 bcfd last week as temperatures moderate, Thomson Reuters projected. Even though storage levels are about 2 percent over the five-year average, analysts have projected inventories will decline faster than usual this year despite weaker power demand, 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 would 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 70.3 bcfd over the past 30 days, compared with 73.6 bcfd a year earlier and 72.8 bcfd for the same period in 2015, according to Reuters data. US exports were up to 8.2 bcfd this week from 5.1 bcfd a year earlier, while imports fell to 8.4 bcfd from 9.8 bcfd. Analysts expect the United States to become a net exporter of gas on an annual basis this year or in 2018 for the first time since 1957.