US natural gas futures fell to a nine-month low on Friday on forecasts for less heating demand next week and later in December than previously expected. Prices have been trending toward new lows for most of December on moderating winter weather forecasts, record production and storage near normal levels.
Front-month gas futures fell 7.2 cents, or 2.7 percent, to settle at $2.612 per million British thermal units, their lowest close since February 22. For the week, the contract dropped over 5 percent, putting it down for a second week in a row after falling more than 9 percent last week. That is the biggest two-week percentage decline since November 2016.
Thomson Reuters analysts project US gas consumption will drop to an average of 104.0 billion cubic feet per day during the mild weather next week before jumping to 120.9 bcfd as frigid air blankets much of the country in the last week of the year. That compares with expected usage of 110.8 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 9.9 bcfd this week, up 36 percent from a year earlier. Production in the lower 48 US states averaged an all-time high of 76.3 bcfd over the past 30 days, according to Reuters data. Daily output peaked at the end of November at 76.8 bcfd and has remained near that level since.
Analysts said US utilities probably pulled a bigger-than-normal 144 billion cubic feet of gas from storage during the week ended on December 15. That compares with a year-earlier decline of 200 bcf and a five-year average decrease of 125 bcf for that period.
If correct, the decline would cut stockpiles to 3.482 trillion cubic feet, about 1.3 percent below the 3.528 tcf five-year average for this time of year. Even though the amount of gas in storage is a little less than usual for this time of year, traders said that 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 seasonal temperatures in December, January and February across much of the country. The winters in 2015-2016 and 2016-2017 were among the warmest on record. The NWS projected heating degree days (HDDs) would total 2,358 during those months this winter. That compares with 2,097 HDDs during the same period last year, 2,079 two years ago and a 10-year average of 2,370.
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