U.S. natural gas futures fell more than 3% on Friday and were poised for a second straight weekly fall, pressured by forecasts for mild weather leading to lower gas demand for heating.
Front-month gas futures for April delivery on the New York Mercantile Exchange fell 5.4 cents, or 3.1%, to $1.69 per million British thermal units (mmBtu) at 9:58 a.m. EDT (1358 GMT). Prices were down over 6% for the week.
“We think overall gas demand for the remainder of March will be relatively tepid. We just have a super mild winter and now we’re sitting here with more gas in storage than we normally would at this time of year,” said Gary Cunningham, director of market research at Tradition Energy.
Meteorologists projected weather across the Lower 48 states would remain warmer than normal through March 18 before turning to near- to colder-than-normal levels from March 19-26.
Meanwhile, prices rose more than 8% on Thursday after 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. This 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.
Despite a bigger withdrawal than market expectations, from a larger context the storage picture is effectively unchanged, analysts at energy consulting firm Gelber and Associates said in a note dated Thursday.
In late February, prices plummeted to $1.511 per mmBtu, marking their lowest level since June 2020. This decline was attributed to several factors, including near-record output, predominantly mild weather conditions, and diminished heating demand throughout the winter season, which led to higher volumes of gas storage.
Output is down as several energy firms, including EQT 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 prices producer after its merger with Southwestern Energy.
U.S. natgas production will decline this year while demand will rise to a record high, the U.S. EIA said in its Short Term Energy Outlook on Tuesday. The agency also projected those low gas prices would boost domestic gas consumption from a record 89.09 bcfd in 2023 to 89.68 bcfd in 2024 before easing to 89.21 bcfd in 2025 as prices rise.
Financial firm LSEG forecast gas demand in the Lower 48 states, including exports, would fall from 110.7 bcfd this week to 110.4 bcfd next week.
LSEG said gas output in the Lower 48 U.S. states has fallen to an average of 100.1 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.
Liquefied natural gas (LNG) exporter Venture Global LNG on Thursday delivered to U.S. regulators a proposed protective order seeking to keep documents on the construction of a Louisiana export facility confidential.
(Reporting by Daksh Grover in Bengaluru Editing by Nick Zieminski)