U.S. natural gas futures dropped to their lowest levels in about a month on Monday, pressured by forecasts of a less cold winter and surplus storage levels.
Front-month gas futures for December delivery on the New York Mercantile Exchange fell 2.3 cents, or 0.8%, to $2.94 per million British thermal units at 10:40 a.m. EST, having slid to their lowest level since Oct. 23 earlier.
“The market is looking at the possibility that we’re going to have a warmer-than-average winter… and if that’s the case, natural gas is going to have a hard time keeping up with gains,” said Phil Flynn, an analyst at Price Futures Group.
“That’s leading the negativity today. The other thing is that we’re going into the Thanksgiving Day holiday where demand traditionally slows.”
Utilities usually start pulling gas out of storage to meet heating demand in mid-November. U.S. gas stockpiles were already about 6% above normal in the week ended Nov. 10 and were expected to reach 7% above normal in the week ended Nov. 17, according to federal energy data and analysts estimates.
U.S. utilities likely added 5 billion cubic feet (bcf) of natural gas into storage last week, as per a Reuters poll. That compares with a withdrawal of 60 bcf during the same week last year and a five-year average decrease of 53 bcf.
“Friday’s big selloff that is being furthered today is developing in the aftermath of a much larger than expected storage injection and amid some bearish tweaks to the short-term temperature view,” said analysts at energy advisory Ritterbusch and Associates.
“From here, our eventual downside possibility to the $2.75 area now appears capable of achievement this week as technical considerations embolden the speculators to add short positions.”
Financial firm LSEG said average gas output in the Lower 48 U.S. states rose to 107.5 billion cubic feet per day (bcfd) so far in November, up from a record 104.2 bcfd in October.
Gas flows to the seven big U.S. LNG export plants rose to an average of 14.2 bcfd so far in November, up from 13.7 bcfd in October and a monthly record of 14.0 bcfd in April.
(Reporting by Tina Parate and Swati Verma in Bengaluru; Editing by Chizu Nomiyama)