NEW YORK: US natural gas futures rose more than 7% on Tuesday as traders covered short positions despite forecasts for warmer weather and lower heating demand, ahead of the expiry of the front-month contract.
On the last day as the front-month contract, gas futures for January delivery rose 16.2 cents, or 7%, to settle at $2.467 per million British thermal units. The contract fell to its lowest in three months in the previous session.
“The winter season is mostly dependent on the temperatures; right now the forecasts indicate above-normal weather conditions in the US and that is where the pressure came from over the past few days, but the expiring contract today is resulting in some short-covering, causing a bit of a rally,” said Thomas Saal, senior vice president of energy at StoneX.
Data provider Refinitiv estimated 375 heating degree days (HDDs) over the next two weeks in the Lower 48 US states, below the 30-year average of 456. HDDs measure the number of degrees a day’s average temperature is below 65 degrees Fahrenheit (18 degrees Celsius). The measure is used to estimate demand to heat homes and businesses.
Refinitiv projected average demand, including exports, would slip from 122.9 billion cubic feet per day this week to 119.0 bcfd next week.
The amount of gas flowing to US LNG export plants, meanwhile, has averaged 10.7 bcfd so far in December, which would top November’s 9.8 bcfd record as a supply crunch in Europe and Asia in recent months has prompted global buyers to purchase more US gas.
“Today’s further rebound off Monday’s low of about $2.23 appears driven largely by short-covering/profit-taking following Monday’s huge price plunge. The selloff may have been an over-reaction to a lack of bullish guidance from the short-term temperature views during the extended weekend,” advisory firm Ritterbusch and Associates said in a note.
In the week to Dec. 21, natural gas speculators had reduced their net long positions by 7,520 contracts to 251,662 contracts, according to data from the Commodity Futures Trading Commission issued on Monday.
Output in the Lower 48 has averaged 91.1 billion bcfd so far in December. That matches a seven-month high of 91.1 bcfd in November 2020 but is below an all-time monthly high of 95.4 bcfd in November 2019.—Reuters
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