US natural gas futures slumped more than 5 percent to their lowest in four weeks in low trading volume on Friday on forecasts for less heating demand over the next two weeks. Front-month gas futures fell 15.5 cents or 5.2 percent to settle at $2.813 per million British thermal units. Prices hit a low of $2.797, levels not seen since October 27.
Volumes remained low at about 92,000 contracts as most of the market participants were away after the US Thanksgiving Day holiday on Thursday. Thomson Reuters forecasts US gas consumption for the next two weeks to be an average of 91.3 billion cubic feet per day this week and 90.4 bcfd next week.
Included in the consumption projection is US exports to Mexico and Canada via pipeline and the rest of the world as liquefied natural gas. US sales abroad were expected to average 10.0 bcfd this week, up 27 percent from the same week a year ago. "The bearish weather factor also appears to pack additional pricing punch with production still developing at a near record pace amidst a recent upswing in the oil and gas rig counts," said Jim Ritterbusch, president of Chicago-based energy advisory firm Ritterbusch & Associates.
Production in the lower 48 US states needed to meet that demand averaged an all-time high of 75.7 bcfd over the past 30 days, according to Reuters data. Output peaked earlier this month at a daily high of 76.4 bcfd and has since remained near that level. US Energy Information Administration (EIA) said utilities pulled 46 billion cubic feet of gas from storage during the week ended November 17, the biggest draw for that week since 2000.
That fell short of the 51 bcf withdrawal forecast by analysts in a Reuters poll and compares with a year-earlier build of 2 bcf and a five-year average decrease of 26 bcf for that period. The projected weekly decrease left stocks at 3.726 trillion cubic feet, or about 3.1 percent below the 3.847 tcf five-year average for this time of year. EIA released the storage report on Wednesday, a day ahead of usual because of the Thanksgiving holiday.
Even though the amount of gas in storage is less than usual for this time of year, some traders said there should be enough fuel to meet demand this winter, especially if production remains near record highs and the latest weather forecasts for the season are correct.
The National Weather Service expects temperatures in December, January and February to be warmer than normal or near normal across much of the country again this year, except for a colder than normal patch in a few states bordering Canada from Washington to Minnesota. The previous two winters (2015-2016 and 2016-2017) were among the warmest on record.
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