U.S. natural gas futures rose on Tuesday from a near four-month low following the release of a midday weather report showing a few more colder-than-normal days in mid- to late-January than expected earlier in the day.
In the latest afternoon forecast, meteorologists projected temperatures in the U.S. Lower 48 states will remain at warmer-than-normal to near-normal levels before turning cold on several days starting around Jan. 17. That is cooler than the morning outlook when the weather was expected to remain warmer-than-normal to near-normal through Jan. 21.
Front-month gas futures for February delivery on the New York Mercantile Exchange (NYMEX) rose 2.7 cents, or 1.3%, to settle at $2.162 per million British thermal units (mmBtu). Earlier in the day, the contract slipped to within a couple cents of the $2.083 low hit on Jan. 3, its lowest level since August.
Traders noted gas prices have dropped about 26% since hitting an eight-month high of $2.905 per mmBtu in early November due to milder-than-usual weather and expectations inventories will rise over the five-year average as near-record production enables utilities to leave more gas in storage, wiping away lingering concerns of supply shortages and price spikes later this winter.
That lack of worry about supplies this winter caused speculators last week to boost their short positions on the NYMEX to the highest since November 2015, according to data from the U.S. Commodity Futures Trading Commission going back to 2006.
At the same time, the premium of gas futures for March over April , a spread traders use to bet on winter weather, turned into a deficit over the past few days for the first time since the contracts started trading in 2008.
Analysts said utilities likely pulled just 60 billion cubic feet (bcf) of gas from storage during the week ended Jan. 3. That compares with a decline of 91 bcf during the same week last year and a five-year (2015-19) average reduction of about 169 bcf for the period.
If correct, the decrease for the week ended Jan. 3 would cut stockpiles to 3.132 trillion cubic feet (tcf), 2.3% above the five-year average of around 3.061 tcf for this time of year.
Gas production in the Lower 48 states rose to 95.6 billion cubic feet per day (bcfd) on Monday from 95.5 bcfd on Sunday, according to Refinitiv. That compares with an average of 95.4 bcfd last week and a record high of 96.8 bcfd on Nov. 30.
With the seasonal cooling of the weather, Refinitiv predicted demand in the Lower 48 states, including exports, would rise from an average of 117.1 bcfd this week to 118.3 bcfd next week. That is a little lower than Refinitiv’s forecasts on Monday of 117.4 bcfd for this week and 118.3 bcfd for next week.
Gas flows to liquefied natural gas (LNG) export plants held at 8.2 bcfd on Monday, the same as Sunday, following a decline at Cameron LNG’s plant in Louisiana, according to Refinitiv data. That compares with an average of 8.5 bcfd last week and a record high of 8.8 bcfd on Jan. 4.
Officials at Cameron said the plant was operating normally and gas flows would fluctuate following the startup of the second liquefaction train last week.
Pipeline flows to Mexico, meanwhile, rose to 5.2 bcfd on Monday from 5.0 bcfd on Sunday, according to Refinitiv data. That compares with an average of 4.4 bcfd last week and an all-time daily high of 6.2 bcfd on Sept. 18.