Natural gas futures extend drop after bearish EIA inventory data

Natural gas extended losses on Thursday to hit a fresh low after US stockpiles fell less than expected last week, while forecasts called for mild weather across most of the US.

Natural gas for delivery in January lost 2.76% to trade at $3.700 per million British thermal units at 15:46 GMT. Prices held in a daily range between $3.808 and $3.671, the lowest since October 28th. The energy source dropped 1.78% on Wednesday to $3.805.

The Energy Information Administration reported that US natural gas inventories slid by 22 billion cubic feet in the week ended November 28th, below analysts projections ranging between 30 and 50 billion cubic feet. It was also beneath the five-year average gain of 50 bcf and last years decline of 141 bcf during the comparable period.

Total gas held in US storage hubs stood at 3.410 trillion cubic feet as of November 28th, narrowing its deficit to the five-year average of 3.782 trillion to 9.8% from 10.4% during the preceding seven days. Stockpiles were also 6.2% below the year-ago level of 3.637 trillion cubic feet.

The East Region saw a net withdrawal of 34 bcf to 1.830 trillion and was 9.1% below the five-year average, while inventories at the West Region rose by 1 bcf to 478 bcf and were 8.4% behind average levels. Stockpiles in the Producing Region rose by 11 bcf to 1.102 trillion, trailing the average by 11.6%.

US weather

Forecasts for overall seasonal weather across most of the US through the middle of December further pressured the market.

According to NatGasWeather.com, natural gas demand in the US over the next seven days will be moderate, compared to normal, with a slightly warmer trend for the December 11 – December 17 period.

One last cold Canadian blast will affect the Great Lakes and New England by Friday, before temperatures reach above-normal levels with only small areas of the regions left behind with colder readings.

Over the weekend the majority of the US will enjoy slightly warmer than usual temperatures, NatGasWeather.com reported, reaching highs of 60s and 70s across the southern half of the US. Heavy rains and high levels of snow will be seen in the western US as weather systems are passing through. However, overall temperatures will become quite mild during the Friday-Monday period.

Starting next Monday, colder weather systems are expected to arrive in the Midwest and Northeast with sub-freezing temperatures. Around mid-December moist Pacific weather systems will move across the country every few days, with periods of rain and snow and normal or above normal temperatures as the very cold Canadian air remains outside the US.