US natural gas futures halt 6-day rally on warm weather

A six-day rally in US natural gas futures stalled on Monday with prices easing slightly on forecasts for continued spring-like weather and light heating demand for the rest of March.
After gaining over 9 percent last week in a technically driven, short covering rally, front-month gas futures on the New York Mercantile Exchange settled 0.3 cents, or 0.2 percent lower to $1.819 per million British thermal units, ending the longest daily winning streak since January.
With warm weather blanketing much of the country, analysts forecast utilities started injecting gas into storage last week. That will leave storage at the end of March at an all-time high around 2.5 trillion cubic feet, topping the end-of-withdrawal-season high of 2.369 tcf set in 2012.
With so much gas left in inventory going into the summer injection season, analysts said, prices would have to remain low for the rest of 2016 to prevent stockpiles from hitting storage limits at the end of October.
Gas prices at the Henry Hub benchmark in Louisiana averaged $2.61 in 2015, the lowest since 1999. So far this year, spot prices have averaged $2.01, while futures for the balance of 2016 were fetching $2.14.
Those low prices are expected to pressure producers to reduce output and encourage power generators to keep burning record amounts of gas instead of coal.
A hot summer would also help sop up some surplus gas, with temperatures expected to be 20 percent warmer than normal in July and 15 percent warmer in August, according to Thomson Reuters Analytics.
The power sector burned a record 26.6 billion cubic feet per day in 2015 and was expected to burn 27.3 bcfd this year, according to federal estimates, making gas instead of coal the primary fuel used by the nation's generators for the first year ever.
After producing a record high 74.2 bcfd of gas in 2015, the US Energy Information Administration forecast output would reach 74.5 bcfd in 2016. Many analysts however expect low gas prices to pressure drillers to cut production in 2016 for the first time since 2005.