U.S. natural gas futures fell more than 3% on Friday, weighed down by forecasts for lower demand over the next week and a sharp drop in European gas prices.
On its first day as the front-month, April gas futures fell 17.1 cents, or 3.7%, to settle at $4.470 per million British thermal units (mmBtu). For the week, the contract is up 0.8%, after rising 12.4% last week.
“Today’s sharp sell-off is likely being accentuated by violation of a two-week up-trend line, as well as updates to the short-term temperature views suggestive of a broad-based warming trend next week,” advisory firm Ritterbusch and Associates said in a note.
Data provider Refinitiv estimated 382 heating degree days (HDDs) over the next two weeks in the Lower 48 U.S. states, slightly lower from 384 HDDs estimated on Thursday. The normal is 338 HDDs for this time of year.
With cold weather moderating, Refinitiv projected that average U.S. gas demand, including exports, would drop from 125.1 billion cubic feet per day (bcfd) this week to 112.5 bcfd next week.
Meanwhile, gas prices in Europe fell more than 30% after sharp gains the previous day on the Russian invasion of Ukraine and as auction results showed flows might resume westward through Russia’s Yamal-Europe pipeline.
“We’ve seen a lot of volatility that’s been high even for natural gas in the last couple of days as the market is grappling with the Arctic cold temperatures, as well as the outside influence of the Russian-Ukraine war,” said Phil Flynn, senior analyst at Price Futures Group in Chicago.
“Today, European prices are down, that’s taken some of the psychological support out of the market,” he added.
Refinitiv said the amount of gas flowing to U.S. LNG export plants has averaged 12.4 bcfd so far in February, in line with January’s monthly record of 12.4 bcfd.
Average gas output in the U.S. Lower 48 states fell from a record 97.3 bcfd in December to 94.0 bcfd in January and 93.2 bcfd so far in February, as cold weather froze oil and gas wells in several producing regions earlier in the new year.