US Natural Gas Futures Set for Best Year Since 2016

U.S. natural gas futures rose on Dec. 31 and were on track for their best year since 2016, helped by forecasts for slightly colder weather than previously expected and record LNG exports.

Front-month natural gas futures for February delivery rose 5.9 cents, or 2.4%, to $2.481 per million Btu by 10:01 a.m. EST (1501 GMT). For the year, the contract is up 13%, its biggest yearly percentage rise since 2016. The market will be closed on Jan. 1 for New Year’s Day.

“While demand is not expected to change much over the next few days, lower supply and the potential for a colder second half of January is giving the market a lift this morning ahead of today’s storage report,” said Robert DiDona of Energy Ventures Analysis.

Data provider Refinitiv estimated 381 heating degree days (HDDs) over the next two weeks in the Lower 48 U.S. states, up from the Dec. 29 forecast of 371 HDDs. The normal is 461 HDDs for this time of year. HDDs measure the number of degrees a day’s average temperature is below 65 degrees Fahrenheit (18 degrees Celsius). The measure is used to estimate demand to heat homes and businesses.

“Couple that insight with today being the last trading day of 2020 and we are seeing increased volatility early in the session,” DiDona added.

However, Refinitiv projected average demand, including exports, would slip from 123 Bcf/d this week to 117.8 Bcf/d next week.

The amount of gas flowing to U.S. LNG export plants, meanwhile, has averaged 10.7 Bcf/d in December, which would top November’s 9.8 Bcf/d record as rising prices in Europe and Asia in
recent months have prompted global buyers to buy more U.S. gas.

Output in the Lower 48 has averaged 91.1 Bcf/d in December. That compares with a seven-month high of 91.1 Bcf/d in November 2020 and an all-time monthly high of 95.4 Bcf/d in November 2019.

This post appeared first on Hart Energy.