US natural gas futures plunged over 4% to a near four years low on Thursday on a smaller-than-expected weekly storage draw, forecasts for milder weather over the next two weeks and a drop in oil futures to their lowest in over a year.
"A trend to milder weather and reduced storage withdrawals going into March are exacerbating bearishness and price impacts," Daniel Myers, market analyst at Gelber & Associates in Houston, said in a report, noting last week's storage withdrawal "was a bit of a letdown as it likely contained the last relatively strong cold shot of the winter season."
The US Energy Information Administration (EIA) said utilities pulled 143 billion cubic feet (bcf) of gas from storage during the week ended February 21.
That is much less than the 158-bcf decline analysts forecast in a Reuters poll and compares with a decline of 167 bcf during the same week last year and a five-year (2015-19) average reduction of 122 bcf for the period. The decrease for the week ended February 21 cut stockpiles to 2.200 trillion cubic feet (tcf), 8.9% above the five-year average of 2.021 tcf for this time of year.
On its first day as the front-month, gas futures for the most active contract for April delivery on the New York Mercantile Exchange fell 8.5 cents, or 4.6%, to settle at $1.752 per million British thermal units (mmBtu), their lowest close since March 2016.
US crude futures dropped over 3% to their lowest since January 2019 as a rise in new coronavirus cases outside China fueled fears of a pandemic that could slow the global economy and dent oil demand.
Since hitting an eight-month high of $2.905 per mmBtu in early November, gas futures have collapsed 40% as record production and mild winter weather enabled utilities to leave more gas in storage, making fuel shortages and price spikes unlikely.
Meteorologists projected weather in the Lower 48 US states will fluctuate between warmer and cooler than normal over the next two weeks, with the most cold weather expected between February 27-29 and March 6-10. That forecast was milder than Wednesday's outlook.
With the weather warming with the coming of spring, data provider Refinitiv projected average demand in the Lower 48, including exports, would ease from 117.7 billion cubic feet per day (bcfd) this week to 114.0 bcfd next week. That forecast for next week is lower than Refinitiv's 114.8-bcfd projection on Wednesday.
The amount of gas flowing to US liquefied natural gas (LNG) export plants edged up to 8.9 bcfd on Wednesday from 8.8 bcfd on Tuesday, according to Refinitiv. That compares with an average of 8.5 bcfd last week and an all-time daily high of 9.5 bcfd on January 31. Traders are watching gas flows to US LNG export plants for declines after customers canceled a couple of cargoes for spring delivery as low gas prices in Europe and Asia made it uneconomic to lift some cargoes.
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