(Reuters) - U.S. natural gas futures eased on Tuesday following a massive 5% drop Monday as forecasts for a little cooler weather over the next two weeks prevented the front-month from falling further.
“Today’s weather forecasts were slightly more supportive than yesterday ... and kept temperatures near average rather than moving to a mild, warmer-than-normal look. This took back some of the expected losses in demand at the end of the month and is preventing prices from continuing to tumble even further,” Daniel Myers, market analyst at Gelber & Associates in Houston, said in a report.
Front-month gas futures for December delivery on the New York Mercantile Exchange fell 1.6 cents, or 0.6%, to settle at $2.621 per million British thermal units. Monday’s loss, which was brought on by forecasts for warmer weather over the next two weeks, was the biggest daily percentage drop for the front-month since January.
Despite the slightly cooler outlook, the U.S. National Weather Service (NWS) continued to forecast temperatures in the Lower 48 U.S. states would switch from colder than normal in the eastern half of the country over the next six to 10 days to warmer than normal across the whole country during the eight to 14 day period.
Data provider Refinitiv projected average gas demand in the Lower 48, including exports, would fall to 109.7 billion cubic feet per day (bcfd) next week from 116.2 bcfd this week.
Those demand forecasts, however, were higher than Refinitiv’s predictions on Monday of 107.8 bcfd for next week and 115.4 bcfd for this week.
Gas flows to liquefied natural gas (LNG) export plants slipped to 7.0 bcfd on Monday from 7.3 bcfd on Sunday, according to Refinitiv data. That compares with an average of 7.1 bcfd last week and an all-time daily high of 7.7 bcfd on Nov. 2.
Pipeline flows to Mexico edged up to 5.3 bcfd on Monday from 5.1 bcfd on Sunday, according to Refinitiv data. That compares with an average of 5.4 bcfd last week and an all-time daily high of 6.2 bcfd on Sept. 18.
Analysts said utilities likely added just 8 billion cubic feet (bcf) of gas to storage during the week ended Nov. 8. That compares with an injection of 42 bcf during the same week last year and a five-year (2014-18) average build of 30 bcf for the period.
If correct, the increase would boost stockpiles to 3.737 trillion cubic feet (tcf), cutting the current surplus over the five-year average of 3.730 tcf to just 0.2% for this time of year.
Earlier this year, the amount of gas in inventory was as much as 33% below the five-year average in March. But record production allowed utilities to inject 2.569 tcf of gas into storage since April 1, turning the deficit into a surplus during the week ended Oct. 11. That was the second biggest amount of gas added during the April-October storage injection season, following 2014’s record 2.727 tcf increase, according to federal data.
Gas production in the Lower 48 fell to 94.3 bcfd on Monday from 94.8 bcfd on Sunday, according to Refinitiv data. That compares with an average of 94.7 bcfd last week and an all-time daily high of 95.2 bcfd on Nov. 2.
Most of the output decline was in Ohio, where flows from the Blue Racer system in Monroe County to Dominion Transmission were down about 0.3 bcfd. Overall declines in Ohio fell about 0.9 bcfd from an average of 7.0 bcfd last week with most of the lower flows in Monroe County. Officials at Blue Racer were not immediately available for comment.
Reporting by Scott DiSavino; Editing by Chizu Nomiyama and Tom Brown