U.S. natural gas futures dropped more than 9% to a two-month low on Wednesday on forecasts for warmer weather over the next two weeks than previously expected that could result in lower heating demand.
On its last day as the front-month, gas futures slipped 49.2 cents, or 9.3%, to $4.790 per million British thermal units (mmBtu) by 09:37 a.m. EST (1437 GMT) after hitting its lowest level since Oct. 24 at $4.780 earlier in the session. The contract lost 23% last week.
“The forecasts are that the weather is going to warm up and then maybe stay warm for (a) period of time… so the weakness in prices is a reaction to the weather forecast that above normal temperatures (will be) over most of the country,” said Thomas Saal, senior vice president for energy at StoneX Financial Inc.
Data provider Refinitiv estimated 327 heating degree days (HDDs) over the next two weeks in the Lower 48 U.S. states, down from 352 HDDs estimated on Tuesday. The normal is 438 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 degrees Fahrenheit (18 degrees Celsius).
Refinitiv projected that average U.S. gas demand, including exports, would rise from 139.9 billion cubic feet per day (bcfd) last week to 143.4 bcfd this week before dropping to 111.2 bcfd in the next week with the weather expected to turn mild in early January. Those forecasts were lower than Refinitiv’s outlook on Tuesday.
Gas output was up about 7 bcfd over the past three days in the U.S. Lower 48 states after dropping to 80.4 billion cubic feet per day (bcfd) on Saturday, its biggest drop in output since the February freeze of 2021, as winter storms over the weekend froze oil and gas wells in Texas, Oklahoma, North Dakota, Pennsylvania and elsewhere.
Meanwhile, U.S. daily demand from the four biggest gas-consuming sectors – residential, commercial, power and industrial – reached an all-time high of 148.5 billion cubic feet (bcf) on Friday, according to Refinitiv data.
Europe’s gas storage sites were 83.2% full overall, with the region’s biggest consumer, Germany, seeing filling levels of 88.2%, according to Gas Infrastructure Europe data.
“Besides the weather factor, the market is being forced to discount a further expected delay in (the) re-opening of Freeport LNG operations amidst reported unresolved regulatory issues,” analysts at energy consulting firm Ritterbusch and Associates said in a note.
Freeport LNG on Friday said it had delayed restart of its long-shut liquefied natural gas (LNG) export plant in Texas, this time to the second half of January.