U.S. natgas futures gain on colder weather, higher demand forecasts

U.S. natural gas futures rose on Wednesday on forecasts for cooler weather and higher heating demand over the next two weeks than previously expected.

On its second to last day as the front-month, March gas futures gained 6.5 cents, or 1.5%, to $4.563 per million British thermal units (mmBtu) by 9:11 a.m. EST (1411 GMT).

“Futures are slightly higher this morning as traders favor bid-side interest based on the extreme cold impacting the middle of the country,” Robert DiDona of Energy Ventures Analysis said.

“We are approaching March contract expiration and there has been tremendous volatility around contract expiration over the past few months,” he added.

Data provider Refinitiv estimated 390 heating degree days (HDDs) over the next two weeks in the Lower 48 U.S. states, up from 372 HDDs estimated on Tuesday. The normal is 346 HDDs for this time of year.

HDDs, used to estimate demand to heat homes and businesses, measure the number of degrees a day’s average temperature is below 65 Fahrenheit (18 Celsius).

With colder weather coming, Refinitiv projected average U.S. gas demand, including exports, would rise from 120.1 billion cubic feet per day this week to 123.7 bcfd next week. Those forecasts were higher than Refinitiv’s outlook on Tuesday.

Refinitiv said the amount of gas flowing to U.S. LNG export plants has averaged 12.4 bcfd so far in February, in-line with January’s monthly record of 12.4 bcfd.

Refinitiv said average gas output in the U.S. Lower 48 states fell from a record 97.3 bcfd in December to 94.0 bcfd in January and 93.2 bcfd so far in February, as cold weather froze oil and gas wells in several producing regions earlier in the new year.

Meanwhile, European gas prices extended their rally on the escalation of the Russia-Ukraine conflict and after Germany halted certification of the Nord Stream 2 gas pipeline project.

The United States and Europe have said they would sanction Russia if it invaded Ukraine. This could prompt Russia to cut exports to Europe, where Russia provides around 30%-40% of gas supplies, about 16.3 bcfd in 2021.