US natural gas futures traded within a few cents of unchanged on Wednesday as forecasts for colder weather later in January offset an outlook calling for less cold and lower demand next week.
Meteorologists projected the weather in the US Lower 48 states will turn from mostly warmer-than-normal now to colder-than-usual from Jan. 16-18 before returning to normal levels through January 23. That is a little cooler later in the month than Tuesday's outlook.
Front-month gas futures for February delivery on the New York Mercantile Exchange were up 1.5 cents, or 0.7%, to $2.177 per million British thermal units at 8:03 a.m. EST (1303 GMT).
That puts the contract on track to rise for a fourth day in a row for the first time since April. The front-month, however, has only gained about 3% during that time.
Longer-term, traders noted gas prices have dropped about 25% since hitting an eight-month high of $2.905 per mmBtu in early November due to milder-than-usual weather and expectations inventories will rise over the five-year average as near-record production enables utilities to leave more gas in storage, wiping away lingering concerns of supply shortages and price spikes later this winter.
Analysts said utilities likely pulled just 60 billion cubic feet (bcf) of gas from storage during the week ended Jan. 3. That compares with a decline of 91 bcf during the same week last year and a five-year (2015-19) average reduction of about 169 bcf for the period.
If correct, the decrease for the week ended Jan. 3 would cut stockpiles to 3.132 trillion cubic feet (tcf), 2.3% above the five-year average of around 3.061 tcf for this time of year.
Gas production in the Lower 48 states eased to 95.4 billion cubic feet per day (bcfd) on Tuesday from 95.6 bcfd on Monday, according to Refinitiv. That compares with an average of 95.4 bcfd last week and a record high of 96.8 bcfd on November 30.
With warmer weather coming, Refinitiv predicted demand in the Lower 48 states, including exports, would slide from an average of 117.0 bcfd this week to 116.6 bcfd next week. That is much lower than Refinitiv's forecasts on Tuesday of 117.1 bcfd for this week and 118.3 bcfd for next week.
Gas flows to liquefied natural gas (LNG) export plants held at 8.1 bcfd on Tuesday, the same as Monday, following a decline at Cameron LNG's plant in Louisiana, according to Refinitiv data. That compares with an average of 8.5 bcfd last week and a record high of 8.8 bcfd on January 4.
In early pipeline flow data from Refinitiv on Wednesday, which is subject to change later in the day, it looks like Cameron started taking in more gas this morning. Officials at Cameron said the plant was operating normally and gas flows would fluctuate following the startup of the second liquefaction train last week.
Pipeline flows to Mexico, meanwhile, rose to 5.5 bcfd on Tuesday from 5.2 bcfd on Monday, according to Refinitiv data. That compares with an average of 4.4 bcfd last week and an all-time daily high of 6.2 bcfd on September 18.
In the spot market, power prices for Wednesday at the Palo Verde hub in the US Desert Southwest fell to their lowest since June amid moderate weather and low demand.
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