US natural gas futures tumble 4% ahead of storage report as mild weather looms

By Scott DiSavino

NEW YORK, Dec 11 (Reuters) - U.S. natural gas futures fell about 4% on Thursday to a two-week low on forecasts for milder weather and lower demand next week than previously expected, near-record output, ample amounts of gas in storage and a reduction in gas prices around the world.

Front-month gas futures for January delivery NGc1 on the New York Mercantile Exchange fell 16.3 cents, or 3.6%, to $4.432 per million British thermal units (mmBtu).

That price decline preceded the release of a federal report on Thursday that is expected to show last week's storage withdrawal was much bigger than usual for this time of year as consumers burned more gas than normal to keep their homes and businesses warm during extreme cold.

Analysts forecast energy firms pulled 166 billion cubic feet (bcf) of gas out of storage during the week ended December 5. That figure compares with a decline of 167 bcf during the same week last year and an average withdrawal of 89 bcf over the past five years (2020-2024). EIA/GAS NGAS/POLL

Looking forward, the market is showing signs that traders are not worried about having enough gas supplies in storage for the winter. The premium of futures for March over April 2026 HGH26-J26 was on track to fall to a record low of around 5 cents per mmBtu.

The industry calls the March-April spread the "widow-maker" because rapid price moves resulting from changing weather forecasts have forced some speculators out of business, including the Amaranth hedge fund, which lost more than $6 billion in 2006.

Traders use the March-April and October-November NGV26-X26 spreads to bet on winter weather forecasts and supply and demand. March is the last month of the winter heating season when utilities pull gas out of storage, and October is the last month of the summer cooling season when utilities inject gas into storage.

SUPPLY AND DEMAND

Financial firm LSEG said average gas output in the Lower 48 states has risen to 109.7 billion cubic feet per day (bcfd) so far in December, up from a monthly record high of 109.6 bcfd in November.

Record output has allowed energy companies to stockpile more gas than usual, leaving the amount of fuel in storage at about 3% above normal for this time of year. EIA/GAS NGAS/POLL

Meteorologists forecast weather across the country would remain mostly warmer than normal through December 26, keeping the amount of gas needed to heat homes and businesses lower than usual during that time.

LSEG projected average gas demand in the Lower 48 states, including exports, would slide from 145.4 bcfd this week to 143.8 bcfd next week. The forecast for next week was lower than LSEG's outlook on Wednesday.

Average gas flows to the eight large U.S. LNG export plants have risen to 18.7 bcfd so far this month, up from a monthly record high of 18.2 bcfd in November.

Around the world, gas prices held near 19-month lows of about $9 per mmBtu at the Dutch Title Transfer Facility (TTF) TRNLTTFMc1 benchmark in Europe and $11 at the Japan-Korea Marker (JKM) JKMc1 in Asia.