US natural gas futures on Thursday slid 2.5 percent to snap a three-session rally and drift away from over two-year highs touched the previous day, as forecasts for warmer than usual weather over the next few days offset bigger-than-expected storage drawdown. Front-month gas futures for February delivery on the New York Mercantile Exchange fell 9.6 cents, or 2.5 percent, to settle at $3.802 per million British thermal units.
"Today's (Thursday's) trade again indicated that daily updates to the 1-2 week temperature views are still being prioritized over the storage data that has been largely discounted," said Jim Ritterbusch, president of Chicago-based energy advisory firm Ritterbusch & Associates. The US Energy Information Administration said utilities pulled 237 billion cubic feet (bcf) of natural gas from storage during the week ended December 23.
That was more than analysts' consensus estimate for a draw of 222 bcf in a Reuters poll and compared with decreases of 209 bcf in the prior week, 50 bcf in the same week last year and a five-year average withdrawal for the week of 80 bcf.
This marked the first instance since May 2015 that the amount of gas in storage has fallen below five-year average levels. "Although this market exhibited a muted response to another bullish storage report, the huge 237 bcf withdrawal strongly suggests a market destined for new high territory," Ritterbusch added.
Prices jumped 4.5 percent on Wednesday, hitting a session high of $3.994, a peak since December 2014. The front month has had a volatile run for the past several weeks. It rose over 7 percent last week, but dropped 9 percent a week earlier. It is about 14 percent up so far this month. Longer term, the latest weather models forecast slightly colder-than-normal temperatures in January and February before turning warmer than normal in March. Thomson Reuters projects US gas demand at 90.7 billion cubic feet per day on average temperatures leading into the New Year's holiday weekend and a rise to 100.9 bcfd next week on colder weather.
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