U.S. natural gas futures eased about 1% on Thursday to a fresh three-month low on forecasts for less cold weather and lower heating demand through late December than previously expected.
That price decline came ahead of a federal report expected to show last week’s storage withdrawal was bigger than usual for this time of year because colder-than-normal weather boosted heating demand.
Analysts forecast U.S. utilities pulled 106 billion cubic feet (bcf) of gas out of storage during the week ended Dec. 1. That compares with a withdrawal of 30 bcf in the same week last year and a five-year (2018-2022) average decline of 48 bcf.
Front-month gas futures for January delivery on the New York Mercantile Exchange fell 1.4 cents, or 0.5%, to $2.555 per million British thermal units (mmBtu) at 9:18 a.m. EST (1418 GMT).
That put the contract on track for its lowest close since Sept. 6 for a second day in a row and also kept it in oversold territory with a Relative Strength Index (RSI) below 30 for a second day in a row.
With production at record levels and ample amounts of gas in storage, the futures market has been sending bearish signals for weeks that futures prices for this winter (November-March) had likely already peaked in November.
One of the biggest signs that the market has given up on winter price spikes was the collapse of the premium of futures for March over April to an all-low of just one cent per mmBtu.
The industry calls the March-April spread the “widow maker” because rapid price moves on changing weather forecasts have forced some speculators out of business, including the Amaranth hedge fund, which lost more than $6 billion in 2006.
March is the last month of the winter storage withdrawal season and April is the first month of the summer storage injection season. Traders have noted that gas demand peaks during the winter heating season and therefore summer prices should not trade above winter.
Exxon Mobil, meanwhile, delayed the expected production of first liquefied natural gas (LNG) at its 2.4-billion cubic feet per day (bcfd) Golden Pass export plant under construction in Texas to the first half of 2025 from the second half of 2024.
Traders said the Golden Pass news added to Wednesday’s 5% drop in front-month futures on expectations that lower U.S. LNG exports in 2024 would cause analysts to reduce their gas demand forecasts for next year.
SUPPLY AND DEMAND
Financial firm LSEG said average gas output in the Lower 48 U.S. states slid to 107.3 bcfd so far in December from a record 107.8 bcfd in November.
Daily output was on track to drop by 2.2 bcfd over the past four days to a preliminary one-month low of 106.0 bcfd on Thursday.
Meteorologists projected the weather would turn from warmer-than-normal from Dec. 7-10 to near-normal from Dec. 11-14 and then back to warmer-than-normal from Dec. 15-22.
With seasonally colder weather coming, LSEG forecast U.S. gas demand in the Lower 48, including exports, would rise from 121.5 bcfd this week to 126.4 bcfd next week. The forecast for this week was lower than LSEG’s outlook on Wednesday.
Gas flows to the seven big U.S. LNG export plants rose to an average of 14.4 bcfd so far in December, up from a record 14.3 bcfd in November.
(Reporting by Scott DiSavino)