US natural gas futures reversed course to sink around 3 percent on Wednesday after rising as much as more than 5 percent earlier, as forecasts for cold weather were toned down. Front-month gas futures for February delivery on the New York Mercantile Exchange fell 11.7 cents, or 3.3 percent, to settle at $3.384 per million British thermal units. Earlier, the contract rose as high as $3.696.
On Monday, the contract surged nearly 16 percent, its biggest daily percentage gain in eight weeks and its second biggest since 2010. "I think the downturn is a correction to the fast and large increase that happened during the weekend and yesterday, and also partially due to the revised weather forecast that shows the cold weather in the next 7-to-14-day period might not be as cold as originally thought," said Zhen Zhu, economist at Oklahoma-based C.H. Guernsey.
Refinitiv data showed there would be 525 heating degree days (HDDs) in the lower 48 US states over the next two weeks, which is less than the previous runs of the forecast. The normal is 456 HDDs for this time of year. HDDs measure the number of degrees a day's average temperature is below 65 degrees Fahrenheit (18 degrees Celsius). The measure is used to estimate demand to heat homes and businesses.
Analysts said utilities likely pulled a below-normal 82 billion cubic feet (bcf) of gas from inventories during the warm week ended January 4. That compares with declines of 208 bcf during the same week last year and a five-year average decrease of 218 bcf for the period. Gas demand in the lower 48 US states should rise for the current week to 116.6 billion cubic feet per day (bcfd) and for next week to 120.6 bcfd, from 105.0 bcfd for the prior week, Refinitiv projected.
Gas output in the lower 48 has averaged near a record high of 86.9 bcfd over the past 30 days. On a daily basis, production fell to 86.7 bcfd on Tuesday, its lowest level in more than a week, according to Refinitiv data. The all-time daily high for output was 88.8 bcfd on November 30.
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