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U.S. natgas futures rise 2% on cold forecasts for this week and in January

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U.S. natural gas futures rose 2% on Monday on forecasts confirming cold weather and high heating demand this week, despite an outlook showing next week will be warmer than previously expected.

Traders noted the latest weather forecast also called for a likely return of cold in January.

Front-month gas futures for January delivery on the New York Mercantile Exchange (NYMEX) rose 4.5 cents, or 2.0%, to settle at $2.341 per million British thermal units, the highest since Dec. 5.

That was the first time the front-month broke above the 14-day moving average, which had been acting as a point of technical resistance, since Nov. 25.

For the year, the front-month was on track to drop about 20%, which would be its third annual decline in a row and its biggest fall since 2017, when the contract lost about 21%.

Meteorologists projected the weather in the U.S. Lower 48 states will turn from colder than normal from Dec. 17-19 to warmer from Dec. 21-29 before turning colder again on Dec. 31. That is much warmer than last week, when the outlook was for colder from Dec. 17-22 and Dec. 27-28.

With the weather expected to moderate, Refinitiv predicted demand in the Lower 48 states, including exports, would fall from an average of 127.0 billion cubic feet per day this week to 121.4 bcfd next week. That is much lower than Refinitiv’s forecast on Friday of 127.4 bcfd for this week and 127.6 bcfd for next week.

Gas flows to liquefied natural gas (LNG) export plants rose to 8.0 bcfd on Sunday from 7.9 bcfd on Saturday, according to Refinitiv data. That compared with an average of 8.0 bcfd last week and an all-time high of 8.2 bcfd on Dec. 8 with the ramp-up of new liquefaction trains at Freeport LNG’s plant in Texas and Cameron LNG’s plant in Louisiana.


Separately, Kinder Morgan Inc’s Elba Island LNG export plant in Georgia sent out its first cargo over the weekend.


Pipeline flows to Mexico, meanwhile, eased to 5.0 bcfd on Sunday from 5.1 bcfd on Saturday, 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.

Traders noted the market expects inventories to return to a surplus over the five-year average during the next week or two as rising production enables utilities to leave more gas in storage, wiping away lingering concerns of potential supply shortages and price spikes this winter.

That lack of worry about supplies for this winter caused speculators to boost their net short positions on the NYMEX and Intercontinental Exchange by 21,591 contracts last week to 235,273, the second-highest in history since hitting a record 238,996 in August, according to data from the U.S. Commodity Futures Trading Commission going back to 2010.

Analysts said utilities likely pulled 89 billion cubic feet of gas from storage during the week ended Dec. 13. That compares with a withdrawal of 132 bcf during the same week last year and a five-year (2014-18) average decline of 112 bcf.

If correct, the decrease for the week ended Dec. 13 would cut stockpiles to 3.429 trillion cubic feet, turning the amount of gas in storage from a deficit during the week ended Dec. 6 to a surplus of 0.3% over the five-year average of 3.420 tcf for this time of year.

Gas production in the Lower 48 states rose to 95.2 bcfd on Sunday from 94.9 bcfd on Saturday, according to Refinitiv. That compared with an average of 95.0 bcfd last week and a record high of 96.3 bcfd on Nov. 30.

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