US natural gas futures were on track to drop to their lowest since March 2016 on forecasts for mild weather through early February and a small decline in liquefied natural gas exports. That price decline came despite production slowing to a four-month low.
Front-month gas futures for February delivery on the New York Mercantile Exchange (NYMEX) were down 4.4 cents, or 2.3%, to $1.882 per million British thermal units (mmBtu) at 8:05 a.m. EST (1305 GMT). If it closes at that current level, it would be the lowest settle since March 2016.
That kept the front-month in technically oversold territory with a Relative Strength Index (RSI) below 30 for a fifth day in a row for the first time since June 2019.
It also put the contract on track to fall about 6% for the week after dropping about 9% last week.
Since hitting an eight-month high of $2.905 per mmBtu in early November, futures have collapsed 35% as record speculative shorts on the NYMEX weigh on the market. Near-record production and mild weather have enabled utilities to leave more gas in storage, making shortages and winter price spikes much less likely.
Declines in several basins in recent weeks have put gas output in the US Lower 48 states on track to fall to a four-month low of 93.0 billion cubic feet per day (bcfd) on Friday, down from 93.6 bcfd on Thursday, according to early pipeline flow data from Refinitiv which is subject to change later in the day. That compares with an average of 94.6 bcfd last week and a daily record high of 96.8 bcfd on November 30.
Meteorologists projected that weather in the Lower 48 states will remain mostly warmer than normal through Feb. 8. This winter so far has been milder than usual with average daily temperatures 3 degrees Fahrenheit higher than normal in December and 5 degrees higher so far in January.
Refinitiv projected average demand in the Lower 48, including exports, would drop from 131.1 bcfd this week to 118.5 bcfd next week before rising to 127.5 bcfd in two weeks. That is a similar to Refinitiv's estimates on Thursday.
Gas flows to LNG export plants were expected to ease to 8.7 bcfd on Friday from 9.1 bcfd on Thursday, according to early pipeline data from Refinitiv. That compares with an average of 7.9 bcfd last week and a record high of 9.3 bcfd on January 19.
Analysts said utilities likely pulled 179 billion cubic feet (bcf) of gas from storage during the week ended Jan. 24. That compares with a withdrawal of 171 bcf during the same week last year and a five-year (2015-19) average reduction of 149 bcf for the period.
If correct, the decrease would cut stockpiles to 2.769 trillion cubic feet (tcf), 8.5% above the five-year average of 2.553 tcf for this time of year.
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