U.S. natural gas futures fell more than 3% on Thursday as output continues to rise and the U.S. market followed a slide in European gas prices.
That price drop came despite a bigger-than-expected storage withdrawal last week and forecasts for colder weather and more heating demand over the next two weeks.
The U.S. Energy Information Administration (EIA) said utilities pulled 136 billion cubic feet (bcf) of gas from storage during the week ended Dec. 24..
That was higher to the 125-bcf decline that analysts had forecast in a Reuters poll and compared with a draw of 120 bcf in the same week last year and a five-year (2016-2020) average decline of 121 bcf.
Last week’s withdrawal reduced stockpiles to 3.226 trillion cubic feet (tcf), or 0.6% above the five-year average of 3.207 tcf for this time of the year.
“A slide in European prices might be having some downward effect on the U.S. market, although I do expect U.S. LNG exports to remain at full capacity for many months to come,” said John Abeln, an analyst with data provider Refinitiv.
“However, near-term outlook remains slightly bearish with production increasing over the past few weeks.”
On its first day as the front-month, gas futures were down 13.6 cents, or 3.5%, at $3.714 per million British thermal units (mmBtu) by 10:42 a.m. EST (1542 GMT).
Output in the U.S. Lower 48 has averaged 97.1 billion cubic feet per day (bcfd) so far in December, which would top the monthly record of 96.5 bcfd in November.
Gas prices in Europe dropped over 10% to a more than three-week low as mild weather capped demand and a steady flow of liquefied natural gas (LNG) offset low Russian pipeline flows.
Refinitiv estimated 464 heating degree days (HDDs) over the next two weeks in the Lower 48 U.S. states, up from the 454 HDDs estimated on Tuesday. The normal is 440 HDDs for this time of year.
HDDs, used to estimate demand to heat homes and businesses, measure the number of degrees a day’s average temperature is below 65 Fahrenheit (18 Celsius).
Refinitiv projected average U.S. gas demand, including exports, would jump from 109.6 billion cubic feet per day (bcfd) this week to 125.9 bcfd next week as the weather turns seasonally colder.
The amount of gas flowing to U.S. LNG export plants has averaged 11.9 bcfd so far in December, now the sixth train at Cheniere Energy Inc’s Sabine Pass plant in Louisiana is producing LNG. That compares with 11.4 bcfd in November and a monthly record of 11.5 bcfd in April.