U.S. natural gas futures extended gains on Thursday, having hit their lowest level in over two weeks earlier in the session, after a weekly report showed a bigger-than-expected storage withdrawal last week.
Front-month gas futures for April delivery on the New York Mercantile Exchange rose 2.4 cents, or 1.5%, to $1.682 per million British thermal units at 11:31 a.m. EDT (1531 GMT).
The U.S. Energy Information Administration (EIA) said utilities pulled a larger-than-expected 9 billion cubic feet (bcf) of gas out of storage during the week ended March 8. That was more than the 3-bcf withdrawal analysts forecast in a Reuters poll and compares with a withdrawal of 65 bcf during the same week a year ago and a five-year (2019-2023) average decrease of 87 bcf for this time of year.
That decrease left gas stockpiles about 37% above normal levels for this time of year.
The EIA report showed “a bigger withdrawal than expected, but it is still a small withdrawal compared to historical averages… it is not really a bullish number,” said Thomas Saal, senior vice president for energy at StoneX Financial.
“The weather’s been very mild for even for this time of year and there are some expectations for a little bit of a cold front to come through, so that might help the market,” he added.
Prices fell as low as $1.511 per mmBtu on Feb. 27, their lowest level since June 2020, as near-record output, mostly mild weather and low heating demand this winter allowed utilities to leave significantly more gas in storage than usual for this time of year.
Those low prices will boost U.S. gas use to a record high in 2024, but cause gas production to drop for the first year since 2020 when the COVID-19 pandemic destroyed demand for the fuel, according to the U.S. Energy Information Administration’s (EIA) latest outlook.
Financial firm LSEG said gas output in the Lower 48 U.S. states fell to an average of 100.3 billion cubic feet per day (bcfd) so far in March, down from 104.1 bcfd in February. That compares with a monthly record of 105.5 bcfd in December 2023.
Output is down as several energy firms, including and Chesapeake Energy, delay well completions and cut back on other drilling activities.
EQT is currently the biggest U.S. gas producer and Chesapeake will soon become the biggest producer after its merger with Southwestern Energy.
LSEG forecast gas demand in the Lower 48 states, including exports, would rise from 109.2 bcfd this week to 111.4 bcfd next week. Those forecasts were lower than LSEG’s outlook on Wednesday.
(Reporting by Daksh Grover in Bengaluru Editing by Marguerita Choy)