U.S. natgas futures dive more than 5% despite big draw from storage

(Reuters) - U.S. natural gas futures fell by more than 5% on Friday in thin trade, as forecasts for warmer weather had investors worried about heating demand even though government data showed a larger-than-usual weekly storage draw that exceeded estimates.

Futures prices also were pressured by profit taking ahead of the expiry of January as the front month contract.

“Despite a larger-than-average storage decrease last week, the market remains overwhelmed by the pessimistic outlook for demand late this month that will extend into early January,” Daniel Myers, market analyst at Gelber & Associates in Houston, said in a report.

Futures prices were already down 3.7%, and then fell further after the U.S. Energy Information Administration (EIA) said utilities pulled 161 billion cubic feet (bcf) of gas from storage during the week ended Dec. 20. That was more than the 148-bcf draw analysts forecast in a Reuters poll and much more than the year-earlier weekly withdrawal of 61 bcf and a five-year average draw of 101 bcf.

The draw for the week ended Dec. 20 cut stockpiles to 3.250 trillion cubic feet (tcf), about 2.1% below the five-year average but 19.0% above the same week a year ago.

On its last day as the front-month contract, gas futures for January delivery on the New York Mercantile Exchange fell 12 cents, or 5.2%, to $2.174 per million British thermal units (mmBtu) at 11:45 a.m. ET (1645 GMT).

Data provider Refinitiv estimated 401 heating degree days (HDDs) in the Lower 48 U.S. states over the next two weeks, down from Thursday’s estimate of 411 HDDs.

“There is a belief that the cold front is going to be short lived, so above-normal temperatures are coming back to the equation,” said Phil Flynn, senior analyst at Price Futures Group in Chicago, adding that “when you get the holiday market, there are less traders taking advantage of it.”

With the weather forecasts warmer and the contract expiring soon, people are quitting their positions, added Flynn.

Gas production in the Lower 48 states rose to 95.3 bcfd on Thursday from 95.1 bcfd on Wednesday, according to Refinitiv. That compares with the record high of 96.3 on Nov. 30.

Reporting by Harshith Aranya, Anjishnu Mondal and Diptendu Lahiri in Bengaluru; Editing by David Gregorio