U.S. natural gas futures dipped on Friday on sufficient fuel in storage and lower heating demand, but prices are still headed for their best weekly rise in 1-1/2 months as voluntary production curtailments are likely underway.
Front-month gas futures for April delivery fell 1.6 cents, or 0.9%, to $1.84 per million British thermal units (mmBtu) as of 10:15 a.m. ET (1515 GMT).
“It still obviously looks like weather is the primary driver – it has been very bearish,” said Kyle Cooper, energy market analyst at IAF Advisors, adding that the market has been over-supplied due to lower demand driven by moderate temperatures across the country.
Despite the declines on Friday, natgas prices were still headed for a more than 14% weekly climb, the most since Jan. 12 and trading above nearly four-year lows hit on Tuesday.
However, “it does look like the producers are indeed scaling back. The production prints at the end of the month were noticeably lower than they had been earlier in the month,” Cooper said.
LSEG said gas output in the U.S. Lower 48 states stood around 99.73 billion cubic feet per day (bcfd) on Friday, from an average of 104 bcfd so far in February, but still short of the monthly record high of 106.3 bcfd in December.
Last week, prices soared about 13% after Chesapeake Energy, soon to be the biggest U.S. gas producer after its merger with Southwestern Energy, cut planned production for 2024 by roughly 30% after a recent plunge in prices.
Natural gas prices logged a fourth straight monthly decline in February, pressured by a mild winter that has left stockpiles well above normal, while output remained near record levels despite an Arctic freeze in January that briefly cut output and sent gas demand to a record high.
“We are still having much difficulty building a bullish case despite historically low pricing given the challenge of prices pushing higher simultaneously with a mounting storage surplus,” energy advisory Ritterbusch and Associates said in a note.
The U.S. Energy Information Administration on Thursday (EIA) said utilities pulled a bigger-than-expected 96 billion cubic feet (bcf) of gas out of storage during the week ended Feb. 23. That cut stockpiles to 2.374 trillion cubic feet (tcf), about 26.5% above the five-year average.
“Demand is set to taper as the end of winter approaches, but weather forecasts have colder than normal temperatures for the month ahead in March, which could power some price upside or at minimum prevent further declines,” according to a note from BMI, a unit of Fitch Solutions.
LSEG estimated 12 cooling degree days (CDDs) for the week as of Friday, compared with 11 CDDs on Thursday.
Market participants also looked out for any impact from the wildfire raging across the Texas panhandle. Dubbed the Smokehouse Creek Fire and officially the largest on record for the state, the fire has doubled in size since earlier this week and burned through an area larger than the state of Rhode Island.
Meanwhile, low natural gas prices will hurt Tellurian Inc’s ability to sell Louisiana gas producing properties in order to pay off enough debt to salvage its liquefied natural gas export (LNG) project, analysts said.
(Reporting by Anjana Anil and Swati Verma in Bengaluru;)