January 3, 2020 Reuters
U.S. natural gas futures slightly extended gains on Friday following the release of a federal government report showing a storage draw in line with expectations.
Traders noted that the market had risen in thin trade earlier in the day as traders covered shorts despite forecasts of even milder weather.
The U.S. Energy Information Administration (EIA) said utilities pulled 58 billion cubic feet (bcf) of gas from storage during the week ended Dec. 27.
The report, normally released on Thursday, was delayed by a day due to the New Year’s Day holiday.
That is in line with the 57-bcf draw analysts forecast in a Reuters poll, and is less than the five-year (2014-18) average decline of 89 bcf.
The decrease for the week ended Dec. 27 cut stockpiles to 3.192 trillion cubic feet (tcf), 1.2% below the five-year average of 3.230 tcf for this time of year.
Front-month gas futures for February delivery on the New York Mercantile Exchange rose 2.5 cents, or 1.2%, to $2.147 per million British thermal units at 11:09 a.m. EST (1609 GMT). During the session it touched a near five-month low of $2.083.
Before EIA released the storage report, the front-month was up 0.2%.
“The market is still incredibly short on an overall basis, so as some positioning starts to roll over with the start of the new year, it is not surprising to see some mismatch between fundamentals and short-term pricing,” said Nina Fahy, head of North American natural gas at Energy Aspects.
Data provider Refinitiv predicted 410 heating degree days (HDDs) over the next two weeks in the Lower 48 U.S. states, up from the 417 HDDs estimated on Thursday. Higher-than-normal temperatures continue, with the 30-year average being 462.
The contract fell about 26% in 2019 and was one of the biggest decliners among commodities last year.
Traders noted prices have dropped about 27% from the eight-month high of $2.905 per mmBtu hit in early November, citing mild weather and expectations inventories will still rise over the five-year average in coming weeks. Near-record production enables utilities to leave more gas in storage, erasing lingering concerns of supply shortages and price spikes during the winter.
Gas production in the Lower 48 rose to 95.3 bcfd on Thursday from 95.2 bcfd on Wednesday. It is close to a record high of 96.8 bcfd hit in late November, according to Refinitiv.