US natural gas futures on Thursday fell over 5 percent to their lowest since October on forecasts for less heating demand later in December than previously expected and a surprise winter build in stockpiles. The US Energy Information Administration (EIA) said utilities added 2 billion cubic feet of gas into storage during the week ended on Dec. 1, the biggest increase for that week since 2001.
That build surprised most analysts, who on average forecast utility would pull 7 bcf in a Reuters poll. It compared with a year-earlier withdrawal of 43 bcf and a five-year average decrease of 69 bcf for that period. The weekly increase boosted stockpiles to 3.695 trillion cubic feet, still about 1 percent below the 3.731 tcf five-year average for this time of year.
Front-month gas futures fell 15.9 cents, or 5.4 percent, to settle at $2.763 per million British thermal units, the lowest close since October 27. That was the biggest daily percentage decline since February.
The decline turned the long-standing premium of the calendar 2018 strip over 2019 into a deficit for the first time since August 2016. It also pushed the premium of the January 2019 contract over January 2018 to its highest since July 2010, according to Reuters data. Even though meteorologists predict the weather will remain colder than normal over the next two weeks, they now expect temperatures during the week of Dec. 17 to be less cold than previously forecast. Projections for this week and next were mostly unchanged.
Thomson Reuters analysts kept their projection for next week's US gas consumption at around an average of 111.6 billion cubic feet per day up from a forecast of 93.5 bcfd this week. Included in the consumption projections are US exports to Mexico and Canada via pipeline and the rest of the world as liquefied natural gas. US sales abroad were projected to average 9.4 bcfd this week, up 24 percent from a year earlier.
Production in the lower 48 US states averaged an all-time high of 76.1 bcfd over the past 30 days, according to Reuters data. Output peaked last week at a daily high of 76.8 bcfd. Even though the amount of gas in storage is still less than usual for this time of year, some traders said that level should be more than enough to meet heating demand this winter, especially if production remains near record highs and the latest weather forecasts for the full season are correct.
The National Weather Service (NWS) projected temperatures would average a little above normal in December, January and February across much of the country, but lower than the winters in 2015-2016 and 2016-2017, which were among the warmest on record.
The NWS projected heating degree days (HDDs) would total 2,344 during the winter months. That compared with 2,097 HDDs during the same period last year, 2,079 two years ago and a 10-year average of 2,370. HDDs measure the number of degrees a day's average temperature is below 65 degrees Fahrenheit (18 Celsius). The measure is used to estimate demand to heat homes and businesses.
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