US natural gas futures fall three percent on mild forecasts

US natural gas futures for November fell more than 3 percent on Tuesday on forecasts for continued mild weather expected to keep demand low over the next two weeks. On its first day as the front-month, the November future on the New York Mercantile Exchange fell 8.4 cents to $2.586 per million British thermal units.
Calendar year 2016 and 2017 futures on the NYMEX meanwhile fell to their lowest levels in at least nine years, while winter 2015 (November-March) fell to a three-year low. In early estimates, analysts said utilities likely added 101 billion cubic feet of gas into storage during the week ended September 25. That compared with builds of 106 bcf in the previous week, 110 bcf a year earlier and a five-year average increase of 94 bcf.
The latest Global Forecast System weather model predicted temperatures in the lower 48 US states would remain warmer-than-normal over the next two weeks, keeping both heating and cooling demand low, with population-weighted heating degree days (HDD) reaching 69. That compares with a forecast 71 HDDs on Monday and a 30-year norm of 91 HDDs. Thomson Reuters Analytics projected average consumption from commercial, residential, power and industrial customers in the lower 48 would ease to 55.4 edge billion cubic feet per day over the next two weeks, from a forecast 56.1 bcfd on Monday. That compares with a 30-year norm of 53.3 bcfd.
While residential, commercial and industrial customers used less gas than normal for this time of year, power generators continued to burn more of the fuel because it remained relatively cheaper than some forms of coal. The gas futures premium over eastern coal held below $1 per mmBtu for a 31st day in a row, the longest stretch since May. Traders said most generators would continue burning gas instead of eastern coal as long as the premium remains below $1.50 due to coal's higher environmental and transport costs.
Gas production in the lower 48 was expected to ease to 74.2 bcfd on Tuesday from 74.4 on Monday, according to Thomson Reuters Analytics. That compared with 70.6 bcfd a year ago and an all-time high of 74.6 bcfd in April. Net imports from Canada into the United States were expected to ease to 4.3 bcfd on Tuesday from 4.5 bcfd on Monday, while US exports to Mexico would edge up to 3.1 bcfd on Tuesday from 3.0 bcfd on Monday.