US natural gas futures fell over 2 percent on Friday on forecasts for weaker demand over the next two weeks and mostly improving production as pipelines exit maintenance work. Front-month gas futures on the New York Mercantile Exchange closed down 7.5 cents at $2.75 per million British thermal units. Despite declines in the last two trading sessions, the front-month ended up over 6 percent for the week due to big gains earlier in the week, making this the first winning week in four.
The declines over the past two days pushed the premium of gas over coal below $1 per mmBtu for the first day in four, making it more likely generators will burn gas instead of coal. Coal futures meanwhile fell to their lowest level since 2009 for a fifth day in a row. Some of the most active gas options were the $1.75 October and $2 August 2015 puts.
The Global Forecast System weather model for the lower 48 US states called for temperatures to remain above normal for the next two weeks, with 186 population-weighted cooling degree days. That compared with 188 on Thursday and a 30-year norm of 152 CDDs. Thomson Reuters Analytics forecast consumption in the lower 48 would average 58.8 billion cubic feet per day over the next two weeks, compared with Thursday's forecast of 59.5 bcfd and a 30-year norm of 53.1 bcfd.
Despite the warm weather, residential, commercial and industrial customers were expected to continue using less gas than usual. Power generators, however, kept burning more because it was cheaper than coal. Power generators were expected to use an average of 31.0 bcfd of gas over the next two weeks. That compared with Thursday's forecast of 31.6 bcfd, 24.5 bcfd a year earlier and a 30-year norm of 24.7 bcf.
Thomson Reuters Analytics expected production to reach 71.4 bcfd in the lower 48 on Friday, down from 71.6 bcfd on Thursday. That compared with 68.7 bcfd a year ago and a record high of 74.5 bcfd in December, according to Thomson Reuters Analytics. In early estimates, analysts said utilities added 97 bcf of gas into storage during the week ended June 12. That compared with builds of 111 bcf in the prior week, 112 bcf a year earlier and a five-year average increase of 87 bcf.
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