US natural gas futures fell 2 percent on Tuesday despite supportive forecasts for colder temperatures over the next two weeks, as investors booked profits on Monday's price gains and daily gas production rose to a record. Front-month gas futures for January delivery fell 5.3 cents or 1.9 percent to settle at $2.692 per million British thermal units.
Production in the lower 48 US states set a daily record of 77.14 bcfd on Monday, which boosted the 30-day average output to an all-time high of 76.44 bcfd, according to Reuters data. "After the run-up (in prices) yesterday, the longs that were under water were quick to take some profits and now are waiting to see how cold it is going to be," said Phil Flynn, an analyst with Price Futures Group in Chicago.
"The weather forecasts turned substantially colder over the weekend, which is supportive, but the market is still a little skeptical." Prices on Monday jumped more than 5 percent, their biggest daily percentage rise since October 30.
"The volatility in natural gas prices over the past 48 hours is related to weather expectations," said Raymond James analyst Muhammed Ghulam. "The National Weather Service's 6 to 10 day and 8 to 14 day outlooks shifted significantly colder over the weekend. Of the five natural gas storage regions, the organization is currently forecasting significantly below-normal temperatures in the Midwest, Mountain, and South Central regions."
Thomson Reuters forecast US gas consumption will rise to an average of 121.3 billion cubic feet day (bcfd) next week from 102.4 bcfd this week.
Included in the consumption projection are US exports to Mexico and Canada via pipeline and the rest of the world as liquefied natural gas. US sales abroad were expected to average 10.3 bcfd this week, up about 41 percent from the same week a year ago.
Production in the lower 48 US states set a daily record of 77.14 bcfd on Monday, which boosted the 30-day average output to an all-time high of 76.44 bcfd, according to Reuters data. Analysts said US utilities probably pulled a larger-than-normal 144 billion cubic feet of gas from storage during the week ended on December 15.
That compared with a year-earlier decline of 200 bcf and a five-year average decrease of 125 bcf for that period. If correct, the decline would cut stockpiles to 3.482 trillion cubic feet, about 1.3 percent below the 3.528 tcf five-year average for this time of year.
Even though the amount of gas in storage is a little less than usual for this time of year, traders said that should be more than enough to meet heating demand this winter, especially if production remains near record highs and the latest weather forecasts for the full season are correct. The National Weather Service projected seasonal temperatures in December, January and February across much of the country. The winters in 2015-2016 and 2016-2017 were among the warmest on record.