U.S. natural gas futures hit a multi-month low on Wednesday on predictions that milder temperatures over the next two weeks could put a dent in heating demand.
At 22:00 GMT, March natural gas futures are trading $4.243, down $0.239 or -5.33%. The United States Natural Gas Fund ETF (UNG) settled at $15.03, down $1.09 or -6.76%.
“The forecasts are that the weather is going to warm up and then maybe stay warm for a period of time … so the weakness in prices is a reaction to the weather forecast that above normal temperatures will be over most of the country,” said Thomas Saal, senior vice president for energy at StoneX Financial Inc.
Refinitiv Predicts Drop in Heating Degree Days
Data provider Refinitiv estimated 327 heating degree days (HDDs) over the next two weeks in the Lower 48 U.S. states, down from 352 HDDs estimated on Tuesday. The normal is 438 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).
Refinitiv Natural Gas Demand and Output
Refinitiv projected that average U.S. gas demand, including exports, would rise from 139.9 billion cubic feet per day (bcfd) last week to 143.4 bcfd this week before dropping to 111.2 bcfd in the next week with the weather expected to turn mild in early January. Those forecasts were lower than Refinitiv’s outlook on Tuesday.
Natural gas output was up about 7 bcfd over the past three days in the U.S. Lower 48 states after dropping to 80.4 Bcfd on Saturday, its biggest drop in output since the February freeze of 2021.
Freeport LNG Update
Freeport LNG announced a further delay in the re-opening of its facility amidst reported unresolved regulatory issues,” analysts at energy consulting firm Ritterbusch and Associates said in a note.
Last Friday, Freeport LNG said it had delayed the restart of its long-shut plant in Texas. This time to the second half of January.
Short-Term Outlook
March natural gas futures were particularly weak the second half of the trading session on Wednesday after new midday forecasts hinted at longer lasting warmth and lower demand to kick off 2023.
NatGasWeather is now saying data trended slightly warmer during the Jan. 9-12 time frame, chipping away at demand expectations for a period that had been expected to bring a return to more seasonal temperatures following exceptional warmth to start 2023.
“Essentially, the new data suggested the warmer than normal pattern wouldn’t go easily,” NatGasWeather said.
The weather pattern from Dec. 28 to Jan. 12 is bearish. Traders are looking for low demand during this time period as well as lower prices. However, the Jan. 9-12 period is not set in stone so we could be looking at heightened volatility should the weather shift back to a more normal weather pattern during this time.
