US natural gas futures fall to one-year low

US natural gas futures lost 4.9 percent on Friday to the lowest level in over a year on forecasts for slightly warmer-than-normal weather and weak demand over the next two weeks. Front-month gas futures on the New York Mercantile Exchange closed down 17.8 cents at $3.464 per million British thermal units.
Weather models for the lower 48 US states called for slightly above-normal temperatures over the next two weeks.
The models projected heating degree days would total 437 over the next two weeks, down from the 443 forecast earlier on Friday. The norm is 448 for this time of year, according to Thomson Reuters Analytics.
With little cold so far this season, production has remained near record levels in part because gas was not trapped in frozen wells and new pipelines have entered service to move more of the fuel out of the ground.
Production was forecast to climb to a record 73.7 billion cubic feet per day on Friday from 73.6 bcfd on Thursday, according to Thomson Reuters Analytics.
That compared with 66.6 bcfd a year ago and a 30-day moving average of 72.2 bcfd.
Consumption meanwhile was expected to fall to 73.2 bcfd on Monday from 84.6 bcfd on Friday on weaker heating demand and the shutdown of many manufacturing facilities for the weeks around the Christmas and New Year's holidays.
That compared with 79.8 bcfd a year ago and a 30-year average of 87.4 bcfd.
With the decline in the NYMEX front-month, the exchange-traded United States Gas Fund, which tracks Henry Hub gas prices, fell to a 13-month low.
On the NYMEX, the 12-month strip and the summer of 2015 both fell to two-year lows, while the 2016 premium over 2015 climbed to a 16-month high.
To remain competitive with gas for power generation, coal prices also dropped with Central Appalachian coal futures down to a five-year low on Thursday.
The premium of the front-month gas contract over front-month coal on an mmBtu basis was about $1.43. A gas premium over $1.50 makes it cost-effective for many utilities to burn coal instead of gas.
The front-month ended down for a fourth week in a row, the longest losing streak since July. It was also down about 16 percent so far for the month, the lowest in two years, and was down 18 percent so far in 2014.