US natural gas futures on Thursday jumped to a near two-year high on forecasts for colder weather and higher heating demand over the next two weeks, and a big weekly storage draw. The US Energy Information Administration said utilities pulled 50 bcf of gas from storage during the week ended November 25. That compares with decreases of 2 bcf in the prior week, 35 bcf in the same seven-day period last year and a five-year average withdrawal of 44 bcf.
Front-month gas futures for January delivery on the New York Mercantile Exchange rose 15.3 cents, or 4.6 percent, to settle at $3.505 per million British thermal units, its highest close since De. 18. That put the front-month up for a ninth session in a row, its longest winning streak since November 2014. It gained 29 percent during that time and was now at its most technically overbought since November 2014.
Next-day gas at the Henry Hub benchmark in Louisiana also climbed to its highest level in two years. Gas prices started rising during the hot summer on forecasts for reduced US production, increased heating demand this winter and rising liquefied natural gas exports after collapsing to a 17-year low in March amid light heating use during what was the warmest winter on record.
With gas prices about 60 percent higher than a year ago, generators were burning more coal to produce electricity. Over the next two weeks, the power sector was expected to burn 22.0 billion cubic feet of gas per day (bcfd) versus 24.4 bcfd during the same period last year, Thomson Reuters data showed. Overall, US gas usage was expected to ease to an average of 84.4 bcfd this week, with mild weather forecast, from 87.5 bcfd last week, before rise to 93.7 bcfd next week when the weather is expected to turn much colder, the data showed.
Gas supplies, meanwhile, were projected to hold at around 78.5 bcfd over the next two weeks, the same as last week, data showed. Stockpiles, which have been at record highs since April, were expected to fall below year-ago levels in the coming weeks if forecasts for near-normal cold in December-February prove correct, especially with US production stuck at its lowest since 2013 for this time of year.
US production averaged 71.1 bcfd over the past 30 days, compared with 73.1 bcfd during the same period in 2015, 72.0 bcfd in 2014 and 67.4 bcfd in 2013. Output, however, has increased in recent weeks, rising to an average of 71.2 bcfd over the past seven days. Drillers were pulling more gas out of the Marcellus and Utica shale basins in Pennsylvania, Ohio and West Virginia since prices there have recently jumped to their highest level since March.
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