US natural gas futures on Monday slipped to their lowest levels since November on forecasts for less cold weather and light heating demand for the rest of the winter. Front-month gas futures eased 1.3 cents, or 0.4 percent, to settle at $3.050 per million British thermal units, its lowest close since November 23.
That put the front-month down about 13 percent from a recent high on January 26. So far, the November-through-March period is on track to be slightly colder than last year's record-warm winter but hotter than the 10- and 30-year averages. Heating degree days have totaled 2,106 so far this season, versus 2,026 during the same period last winter, a 30-year average of 2,352 and a 10-year average of 2,290, according to Thomson Reuters data.
Looking ahead, those warmer-than-normal winter forecasts pushed futures into contango through August and helped push the premium of November 2017 over October 2017 to its highest since June. That November premium over October has almost doubled over the past two weeks from 3.5 cents on January 26 to as much as 6.1 cents on Monday.
US gas demand will slide to 95.8 billion cubic feet per day this week and 93.8 bcfd next week from 100.7 bcfd last week as temperatures moderate, Thomson Reuters projected. Analysts said utilities likely pulled 151 billion cubic feet of gas from storage during the cold week ended February 3, the most since 2015. That compares with declines of 93 bcf a year earlier and the five-year average of 138 bcf for that week.
Even though storage levels are currently over the five-year average, analysts have projected inventories will decline faster than usual this year despite weaker power demand, in part because exports are higher and production is lower. After the power sector used a record amount of gas to generate electricity last year, analysts projected it would burn less in 2017 because prices of the fuel are expected to be about 25 percent higher, making coal a cheaper alternative for many generators.
US production averaged 70.1 bcfd over the past 30 days, compared with 73.5 bcfd a year earlier and 72.6 bcfd for the same period in 2015, according to Reuters data. US exports, meanwhile, were up to 8.0 bcfd this week from 5.1 bcfd a year earlier. Analysts expect the United States to become a net exporter of gas on an annual basis this year or next for the first time since 1957.
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