US natural gas futures edged lower on Thursday, after touching a near two-week high earlier in the session, as a bigger-than-expected storage draw was offset by forecasts of warmer than usual weather for the next two weeks. After rising 8 percent on Wednesday on cold January forecasts, front-month gas futures for Thursday fell 0.4 cents, or 0.1 percent, to settle at $3.538 per million British thermal units. The contract hit a session high of $3.626, a peak since December 9.
The US Energy Information Administration said utilities pulled 209 billion cubic feet of gas from storage during the colder-than-normal week ended on December 16, the most for that period since at least 1994. That was more than the analysts consensus estimate for a draw of 201 bcf in a Reuters poll and compared with declines of 147 bcf in the prior week, 33 bcf a year earlier and a five-year average of 101 bcf for that week.
"The 209 bcf net withdrawal for last week was more than anticipated, the likely result of stronger-than-anticipated heating demand. The data implies a somewhat tighter balance in the market for the reports to follow as well," Tim Evans, Citi Futures' energy futures specialist, said in a note. The front-month has had a volatile run for the past several weeks. It dropped 9 percent last week on warmer forecasts after soaring 43 percent over the prior four weeks on a colder outlook.
Changing winter forecasts also had a major impact on the March-April spread. The premium of March over April soared from 2.1 cents on November 11 to 24 cents on December 9, then collapsed 78 percent in the seven trading days through December 20 to a low of 5.4 cents before tripling to a high of 14.3 cents over the past two days.
Longer term, the latest weather models forecast colder-than-normal temperatures in January, a near-normal February and a warmer-than-normal March. Thomson Reuters projected the cold start to this week would boost US gas demand to 111.8 billion cubic feet per day from an average of 108.3 bcfd last week, before falling to 92.9 bcfd during the Christmas and New Year's holiday week, when temperatures are expected to moderate.
US production averaged 70.7 bcfd for the past 30 days, compared with 73.5 bcfd a year earlier, 72.6 bcfd for the same period in 2014 and 66.6 bcfd in 2013, according to Reuters data. Output in the past week, however, was down to just 70.0 bcfd, due in part to maintenance work, even though prices in the Marcellus and Utica shale basins in Pennsylvania, Ohio and West Virginia recently traded near their highest since November 2014.