(Reuters) – U.S. natural gas futures fell more than 5% on Monday, dragged down by forecasts of milder weather and lower heating demand next week than previously anticipated.
Front-month gas futures for March delivery on the New York Mercantile Exchange were down 30 cents, or 7.1%, at $3.93 per million British thermal units (mmBtu) at 8:45 a.m. EST. The contract surged to its highest level in more than two years last week.
“We are quickly getting closer to the start of spring and the market is pulling back on this warm-up,” said Phil Flynn, an analyst at Price Futures Group.
Financial firm LSEG said average gas output in the Lower 48 U.S. states has risen to 104.5 billion cubic feet per day (bcfd) so far in February, from 102.7 bcfd in January, when freezing oil and gas wells and pipes, known as freeze-offs, cut production. That compares with a monthly record of 104.6 bcfd in December 2023.
With milder weather coming, LSEG forecast average gas demand in the Lower 48 states, including exports, will fall from 127.5 bcfd this week to 119.5 bcfd next week.
LSEG estimated 297 heating degree days over the next two weeks, compared with 356 estimated on Friday.
“We have some selling back today and that’s because we’re not going to get the really strong withdrawals over the next three weeks that some folks were anticipating… but long term, we are still well supported from a fundamental perspective through summer,” said Gary Cunningham, director of market research at Tradition Energy.
The amount of gas flowing to the eight big U.S. LNG export plants has risen to an average of 15.9 bcfd so far in February, up from 14.6 bcfd in January. That compares with a monthly record high of 14.7 bcfd in December 2023.
“The increase in LNG exports is going to be a supportive factor for prices, so even if we do sell off a bit, the demand globally should keep the market from falling too far,” Flynn said.
Dutch and British wholesale gas prices traded in a narrow range as temperatures across the continent turned milder following a recent cold snap, and as the market monitored the peace talks to end the war in Ukraine.
Gas was trading at around $14 per mmBtu at the Dutch Title Transfer Facility (TTF) benchmark in Europe and the Japan Korea Marker (JKM) benchmark in Asia.
The European Union will seek more gas from countries including the U.S. to replace Russian supplies, and expand renewable energy faster to cut its overall reliance on the fuel, the EU’s energy commissioner has said.
The EU has pledged to quit Russian fossil fuels by 2027 in response to Moscow’s invasion of Ukraine.
Reporting by Anmol Choubey in Bengaluru; Editing by Paul Simao
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