US natgas futures slip on milder weather forecast, focus on storage report

US natural gas futures eased on Thursday on forecasts for milder weather over the next two weeks, ahead of a federal report expected to show a bigger-than-usual storage withdrawal last week.

Analysts forecast US utilities pulled 136 billion cubic feet (bcf) of gas from storage during the week ended Feb. 19. That compares with a decrease of 119 bcf in the same week last year and a five-year (2016-2020) average withdrawal of 81 bcf.

If correct, last week's decrease would cut stockpiles to 1.807 trillion cubic feet (tcf), which would be 10.7% below the five-year average of 2.023 tcf for this time of year.

Front-month gas futures fell 3 cents, or 1.1%, to $2.786 per million British thermal units at 7:46 a.m. EST (1246 GMT).

Data provider Refinitiv said output in the Lower 48 US states averaged 90.7 billion cubic feet per day (bcfd) so far in March. That compares with a 28-month low of 86.5 bcfd in February when extreme weather froze gas wells and pipes in Texas and an all-time monthly high of 95.4 bcfd in November 2019.

Refinitiv projected average gas demand, including exports, would drop from 112.4 bcfd this week to 105.1 bcfd next week as the weather turns seasonally milder.

The amount of gas flowing to US LNG export plants, meanwhile, averaged 10.2 bcfd so far in March. That compares with a four-month low of 8.5 bcfd in February as extreme cold cut power and gas supplies, and a monthly record high of 10.7 bcfd in December.

Buyers around the world continue to purchase near record amounts of US gas because prices in Europe and Asia remain high enough to cover the cost of shipping the US fuel across the oceans.

Traders, however, noted US LNG exports cannot rise much more until new units enter service in 2022 since the United States has the capacity to export only about 10.5 bcfd of gas as LNG. LNG plants can pull in a little more gas than they can export since they use some of the fuel to run the facility.