US natural gas futures settled a few cents lower on Friday after dropping to their lowest for the year in earlier trading on forecasts for weak heating demand over the next two weeks and continued big storage builds. After falling 3 percent over the prior three days, front-month gas futures on the New York Mercantile Exchange closed down 3 cents, or 0.8 percent, at $3.766 per million British thermal units. During the session, the contract touched its lowest price of the year, $3.715.
For the week, the front-month contract fell 2 percent. It was down 9 percent for the month and 11 percent for the year to date. Analysts estimated utilities added 99 billion cubic feet of gas into storage this week, topping builds of 94 bcf in the prior week, 86 bcf in the same week a year earlier and the five-year average of 70 bcf.
MDA Weather Services forecast warm weather building in the US West over the next five days before the East and South settle into a cool pattern in the middle of next week. US weather models, meanwhile, forecast higher-than-normal autumn temperatures over the next two weeks, with just 147 heating degree days (HDDs), down from 151 on Thursday. The normal for this time of year is 159 HDDs, according to Thomson Reuters Analytics. On the NYMEX, the premium of the March 2015 contract over April 2015, the so-called widow maker, settled at a three-month low of 19.6 cents. During the session, it touched an 11-month low of 18.3 cents.
On the NYMEX, the 12-month strip, the balance of 2014, the winter of 2014 and calendar year 2015 all fell to fresh 11-month lows. The premium on the front-month gas contract over spot Appalachian coal gained a penny to $1.64. A gas premium above $1.50 makes it cost effective for many utilities to burn coal. On the IntercontinentalExchange, next-day gas at the Henry Hub, the benchmark supply point in Louisiana, and Dominion South in the Marcellus shale in south-west Pennsylvania both lost about 8 cents to average $3.71 and $1.91, respectively.
Next-day gas in New York lost 26 cents to $1.80, while Chicago citygates lost 4 cents to $3.76, and Southern California Border lost 13 cents to $3.70, the lowest in 11 months. In power markets, Mid Columbia in the Pacific Northwest gained $1 to average $34 per megawatt hour, while PJM West in the Mid Atlantic gained $5 to $43 per megawatt hour.