(Reuters) - U.S. natural gas futures fell over 4% to a near two-month low on Monday on forecasts for less cold weather and heating demand through late December than previously expected.
Meteorologists now forecast the weather over the U.S. Lower 48 states will fluctuate from warmer to colder than normal through Dec. 20 before turning warmer than normal from Dec. 21 through at least Dec. 24. Previously, they predicted temperatures would return to near-normal levels after remaining lower than normal from Dec. 11-Dec. 19.
"Despite a near-term shot of cold that will boost heating demand in the Midwest and East in the middle of this week, weather forecasts haven’t held on to any sustained colder-than-normal period so far in December," Daniel Myers, market analyst at Gelber & Associates in Houston, said in a report, noting near record production has helped ease "any concern that the market will run short in coming months."
Front-month gas futures for January delivery on the New York Mercantile Exchange (NYMEX) fell 10.2 cents, or 4.4%, to settle at $2.232 per million British thermal units, their lowest close since Oct. 11.
Earlier in the session, the front-month fell to $2.158, its lowest since Aug. 23.
That price collapse caused futures for February to trade at a premium over January for the first time since 2008.
It also caused the premium of futures for March over April 2020, a spread traders use to bet on winter weather, and futures for all of 2020 to drop to their lowest levels on record.
Those price declines prompted speculators to boost their net short positions on the NYMEX and Intercontinental Exchange last week by 44,641 contracts to 213,682, their highest since August, according to data from the U.S. Commodity Futures Trading Commission (CFTC).
With less cold weather forecast, data provider Refinitiv cut its projections for average demand for next week in the Lower 48 states, including exports, to 123.4 billion cubic feet per day (bcfd) from 131.2 bcfd on Friday. Refinitiv also reduced its forecast for average demand this week to 118.0 bcfd from 119.7 bcfd on Friday.
Gas flows to liquefied natural gas (LNG) export plants rose to a record 8.2 bcfd on Sunday with an increase in flows to the second train at Freeport LNG's plant in Texas, up from 7.9 bcfd on Saturday, according to Refinitiv data. That compares with an average of 7.6 bcfd last week.
Separately, traders said Kinder Morgan Inc's Elba Island LNG export plant in Georgia could send out its first cargo this week.
Pipeline flows to Mexico, meanwhile, slipped to four-month low of 4.9 bcfd on Sunday from 5.1 bcfd on Saturday, according to Refinitiv data. That compares with an average of 5.3 bcfd last week and an all-time daily high of 6.2 bcfd on Sept. 18.
Analysts said utilities likely pulled 82 billion cubic feet (bcf) of gas from storage during the week ended Dec. 6. That compares with a withdrawal of 75 bcf during the same week last year and a five-year (2014-18) average decline of 68 bcf. [EIA/GAS]
If correct, the decrease would cut stockpiles to 3.509 trillion cubic feet (tcf), 0.7% below the five-year average of 3.532 tcf for this time of year.
Analysts said stocks would likely return to a surplus over the five-year average during the next month or so as rising production enables utilities to leave more gas in storage.
Gas production in the Lower 48 states slipped to 95.3 bcfd on Sunday from 95.5 bcfd on Saturday, according to Refinitiv. That compares with an average of 95.4 bcfd last week and a record high of 96.3 bcfd on Nov. 30.
Week ended Week ended Year ago Five-year
Dec. 6 Nov. Dec. 6 average
(Forecast) 29(Actual) Dec. 6
U.S. natgas storage (bcf): -82 -19 -75 -68
Refinitiv Heating (HDD), Cooling (CDD) and Total (TDD) Degree Days
Two-Week Total Forecast Current Day Prior Day Prior Year 10-Year 30-Year Norm
Norm
U.S. GFS HDDs 403 430 376 419 423
U.S. GFS CDDs 4 3 1 3 3
U.S. GFS TDDs 407 433 377 422 426
Refinitiv U.S. Weekly GFS Supply and Demand Forecasts
Prior Week Current Next Week This week Five-Year
Week last year Average For
Month
U.S. Supply (bcfd)
U.S. Lower 48 Dry Production 95.6 95.4 95.6 87.3 76.4
U.S. Imports from Canada 7.8 8.1 8.4 8.9 8.5
U.S. LNG Imports 0.0 0.0 0.0 0.3 0.3
Total U.S. Supply 103.5 103.6 104.0 96.5 85.2
U.S. Demand (bcfd)
U.S. Exports to Canada 3.6 3.8 3.7 3.4 2.5
U.S. Exports to Mexico 5.3 5.3 5.3 4.9 3.6
U.S. LNG Exports 7.5 8.2 8.3 4.5 1.6
U.S. Commercial 15.0 15.4 16.7 15.9 14.1
U.S. Residential 24.9 25.2 28.3 27.2 23.8
U.S. Power Plant 26.9 27.8 28.1 25.4 23.4
U.S. Industrial 24.4 24.8 25.3 25.0 23.4
U.S. Plant Fuel 4.7 4.7 4.7 4.7 4.7
U.S. Pipe Distribution 2.6 2.7 2.8 2.7 2.7
U.S. Vehicle Fuel 0.1 0.1 0.1 0.1 0.1
Total U.S. Consumption 98.7 100.8 106.0 101.0 92.2
Total U.S. Demand 115.2 118.0 123.4 113.8 99.9
SNL U.S. Natural Gas Next-Day Prices ($ per mmBtu)
Hub Current Day Prior Day
Henry Hub 2.31 2.42
Transco Z6 New York 2.16 2.66
PG&E Citygate 3.31 3.29
Dominion South 1.72 1.86
Chicago Citygate 2.16 2.20
Algonquin Citygate 3.94 4.50
SoCal Citygate 4.28 5.25
Waha Hub 1.35 1.46
SNL U.S. Power Next-Day Prices ($ per megawatt-hour)
Hub Current Day Prior Day
New England 39.50 41.50
PJM West 22.25 23.50
Ercot North 22.75 24.00
Mid C 28.75 29.38
Palo Verde 22.00 26.67
SP-15 35.00 41.25
(Reporting by Scott DiSavino; editing by Jonathan Oatis)
