US natural gas futures fell on Wednesday with production at a record high despite forecasts for a bitter cold start to the New Year that is expected to keep heating demand high through the first week of 2018. Front-month gas futures fell 5.5 cents, or 2 percent, to settle at $2.637 per million British thermal units.
Next-day power and gas prices in New England climbed to the highest levels since last winter on forecasts for a couple days of bitter cold in the region. Temperatures in Boston, the biggest city in New England, were expected to top out in the low 30s F (around 1 degree C) on Thursday and Friday, according to meteorologists at AccuWeather. Earlier this week, temperatures there hit the low 50s.
Despite the higher forecasts for heating demand during the first week of January, Thomson Reuters analysts projected US gas consumption next week will drop to an average of 117.9 billion cubic feet per day from Tuesday's forecast of 121.3 bcfd. That compares with expected usage of 102.4 bcfd during the mild weather 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 10.5 bcfd this week, up 40 percent from a year earlier.
Production in the lower 48 US states averaged an all-time high of 76.5 bcfd over the past 30 days, according to Reuters data. Daily output peaked at the end of November at 77.3 bcfd earlier this week. Analysts said US utilities probably pulled a bigger-than-normal 170 billion cubic feet of gas from storage during the colder than normal 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 3.456 trillion cubic feet, about 2 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 there was more than enough fuel 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 remain mostly seasonal across much of the country in December, January and February. That follows two of the warmest winters on record in 2015-2016 and 2016-2017.
The NWS projected heating degree days (HDDs) would total 2,358 during the three winter months. 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. 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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