U.S. natgas drops to 9-month low despite large storage draw

(Reuters) - U.S. natural gas futures dropped over 5% to a nine-month low on Thursday on forecasts for warmer weather over the next two weeks, despite a bigger than expected storage draw.

Prices stayed negative even after a federal report showed a much bigger-than-usual storage draw last week as a winter storm that swept across large parts of the country raised heating demand.

The U.S. Energy Information Administration (EIA) said utilities pulled 213 B cubic feet (bcf) of gas from storage during the week ended Dec. 23, exceeding the 201 bcf decline analysts forecast in a Reuters poll, compared with a decrease of 125 bcf in the same week last year and a five-year (2017-2021) average decline of 106 bcf.

On the first day as front-month, February gas futures slipped 22.2 cents, or 4.7%, to $4.420 per MM British thermal units by 12:17 p.m. ET, the lowest level since mid-March.

The weather outlook is for average temperatures to be warmer than normal, which is outweighing the storage report, said Robert DiDona of Energy Ventures Analysis. There are a lot of moving parts in the natural gas market and "the initial response from the trading community is to sell," he added.

Data provider Refinitiv estimated 315 heating degree days (HDDs) over the next two weeks in the lower 48 U.S. states, down from 327 HDDs estimated on Wednesday. The normal is 439 HDDs for this time of year.

HDDs estimate demand to heat homes and businesses by measuring the number of degrees a day's average temperature is below 65 degrees Fahrenheit (18 degrees Celsius). With the weather expected to turn mild in early January, Refinitiv projected average U.S. gas demand, including exports, would drop from 142.6 bcf per day (bcfd) this week to 111.6 bcfd in the next week.

Gas output was up about 10 bcfd over the past four days in the U.S. lower 48 states after dropping to 80.4 bcfd on Saturday, its biggest drop in daily output since the February freeze of 2021. U.S. daily demand from the four biggest gas-consuming sectors - residential, commercial, power and industrial - reached an all-time high of 148.5 bcf on Friday, according to Refinitiv data.

Freeport LNG said on Friday it was again delaying the restart of its long-shut liquefied natural gas export plant in Texas, this time from the end of the year to the second half of January, pending regulatory approval. The Freeport plant shut on June 8 after a pipe failure caused an explosion due to inadequate operating and testing procedures, human error and fatigue, according to a report by consultants hired to review the incident and suggest action.

• Most Read
• Most Commented