US natural gas futures on Monday fell to their lowest since mid-November on forecasts for less-cold weather and lighter heating demand over the next two weeks and the rest of the winter. Front-month gas futures fell 9.0 cents, or 3 percent, to settle at $2.944 per million British thermal units, its lowest close since November 18. That puts the front-month down about 25 percent from a recent high of $3.994 on December 28 due to warmer forecasts for the rest of the winter.
So far, the November-through-March period is on track to be slightly colder than last year's record-warm winter but warmer than the 10- and 30-year averages. Heating degree days have totalled 2,241 so far this season, versus 2,219 during the same period last winter, a 30-year average of 2,538 and a 10-year average of 2,477, according to Thomson Reuters data.
Looking ahead, those warmer-than-normal forecasts pushed futures into contango through August, with the premiums of April 2017 over March 2017 and March 2018 over March 2017 at their highest since some of the contracts started trading in 2008. US gas demand will slide to 91.5 billion cubic feet per day this week and 84.2 bcfd next week from 96.9 bcfd this week as temperatures moderate, Thomson Reuters projected.
Analysts said utilities likely pulled 120 billion cubic feet of gas from storage during the week ended on February 10, the least since 2015. That compares with withdrawals of 136 bcf a year earlier and the five-year average of 156 bcf for that week. Gas stockpiles are about 2 percent above the five-year average and will likely remain over that norm for the next several weeks if warm winter forecasts prove correct.
Longer term, however, analysts projected inventories will decline faster than usual this year despite weaker power demand due to rising exports and falling production. 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.
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