US natural gas futures closed on Friday at their highest in over a week on forecasts utilities could start pulling gas out of storage as early as next week as heating demand rises with the weather turning seasonally cooler. If utilities start pulling gas out of storage next week, it would be about a week earlier than the five-year average.
Front-month gas futures rose 4.9 cents, or 1.7 percent, to settle at $2.984 per million British thermal units, its highest close since October 23. For the week, the front-month ended up over 8 percent primarily because of a contract roll from the lower-priced November to the higher-priced December futures. Last week the contract was down more than 5 percent.
The latest forecasts call for seasonal temperatures over the next two weeks that will slowly boost heating demand as the weather turns colder. Thomson Reuters forecast US gas consumption will rise to an average of 83.8 billion cubic feet day (bcfd) next week and 86.4 bcfd in two weeks, from 78.8 bcfd this week. That compares with Thursday's forecasts of 84.8 bcfd for next week and 79.1 bcfd this week.
Traders noted most changes from Thursday's forecast for next week resulted from lower than previously expected heating demand. Production in the lower 48 US states set a record high of 75.8 bcf one day last week, topping the prior high of 75.0 bcfd in September 2015, according to Reuters data. Output so far this week has averaged 75.1 bcfd.
Analysts said utilities likely added a smaller-than-usual 24 bcf of gas into storage in the week to November 3 in part because of rising exports, which would leave stocks about 1.6 bcfd below the five-year average for this time of year. That compares with an increase of 54 bcf during the same week a year earlier and the five-year average build of 45 bcf for the period.
US gas exports overall are expected to average 8.8 bcfd this week, up 49 percent from a year earlier, primarily the result of much higher shipments of liquefied natural gas, according to Reuters data. Some traders noted that unless supply and demand forecasts change, utilities could start pulling gas from inventory as soon as next week to meet seasonal increases in heating demand.
Even though the amount of gas in storage was a little less than usual for this time of year - around 3.8 trillion cubic feet - traders noted that should be more than enough to meet demand this winter especially if the latest forecasts for another warm snow season are correct. The US National Weather Service expects temperatures in December, January and February to be warmer than normal across much of the country again this year. The last two winters (2015-16 and 2016-17) were among the warmest on record.
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