March 12, 2020 / 1:01 PM / a month ago

U.S. natgas futures fall 5% with oil decline ahead of storage report

    March 12 (Reuters) - U.S. natural gas futures fell about 5%
on Thursday with a 6% drop in oil prices despite forecasts for
cooler weather and higher heating demand in the United States
over the next two weeks than earlier expected.
    Traders noted that gas price decline came ahead of a federal
report expected to show a smaller-than-usual storage withdrawal
last week.
    Analysts said utilities likely pulled 59 billion cubic feet
(bcf) of gas from storage during the week ended March 6. That
compares with a decline of 164 bcf during the same week last
year and a five-year (2015-19) average reduction of 99 bcf for
the period.
    If correct, the decrease for the week ended March 6 would
bring stockpiles to 2.032 trillion cubic feet (tcf), 11.9% above
the five-year average of 1.816 tcf for this time of year.
    The U.S. Energy Information Administration will release its
weekly storage report at 10:30 a.m. EDT (1430 GMT) on Thursday.
    Front-month gas futures for April delivery on the New
York Mercantile Exchange fell 9 cents, or 4.8%, to $1.788 per
million British thermal units (mmBtu) at 8:48 a.m. EDT (1248
GMT).
    Price swings earlier in the week caused gas traders to boost
total futures volume on the NYMEX to 1,039,442 contracts on
March 10, the highest since November 2018 when trading hit a
record high of more than 1.6 million contracts as prices jumped
18% one day before plunging 17% the next.
    Those big price swings also caused at-the-money implied
volatility for the front-month to jump to 53.8%, its
highest since December. That is an increase of more than 50%
since volatility fell to a recent low in late February.
    Oil prices dropped on Thursday following surprise
travel restrictions imposed by U.S. President Donald Trump in an
attempt to halt the spread of coronavirus after the World Health
Organization described the outbreak as a pandemic.
    Earlier in the week gas futures jumped over 13% on
expectations the oil price collapse would cause drillers to cut
back on oil and associated gas production in shale basins like
the Permian in West Texas and eastern New Mexico, allowing
demand to absorb some of the gas supply glut that has built up
in recent years. 
    Overall, gas prices were down 37% since hitting an
eight-month high of $2.905 per mmBtu in early November because
near-record production and mild winter weather enabled utilities
to leave more gas in storage, making fuel shortages and price
spikes unlikely.
    Data provider Refinitiv projected average demand in the U.S.
Lower 48 states, including exports, would edge up from 101.4
billion cubic feet per day (bcfd) this week to 104.5 bcfd next
week. That is higher than Refinitiv's forecast on Wednesday of
100.8 bcfd this week and 102.3 bcfd next week.
    The amount of gas flowing to U.S. LNG export plants was on
track to rise to 8.4 bcfd on Thursday from 8.3 bcfd on
Wednesday, according to preliminary data from Refinitiv.
         
                                        Week ended     Week ended    Year ago    Five-year   
                                         March 6        Feb. 28      March 6      average    
                                        (Forecast)      (Actual)                  March 6    
 U.S. natgas storage (bcf):                -59            -109         -164         -99      
                                                                                             
                                                                                             
 Refinitiv Heating (HDD), Cooling (CDD) and Total (TDD) Degree Days                          
 Two-Week Total Forecast               Current Day     Prior Day    Prior Year    10-Year    30-Year Norm
                                                                                   Norm      
 U.S. GFS HDDs                             234            237          293          280          278
 U.S. GFS CDDs                              28             26           10          14            11
 U.S. GFS TDDs                             262            263          370          294          289
                                                                                             
 Refinitiv U.S. Weekly GFS Supply and Demand Forecasts                                       
                                        Prior Week    Current Week  Next Week    This Week    Five-Year
                                                                                 Last Year   Average For
                                                                                                Month
 U.S. Supply (bcfd)                                                                                
                                                                                             
 U.S. Lower 48 Dry Production              93.9           93.7         93.7        88.5          76.9
 U.S. Imports from Canada                  7.1            6.6          7.3          8.6          8.5
 U.S. LNG Imports                          0.1            0.1          0.0          0.1          0.2
 Total U.S. Supply                        101.2          100.4        100.9        97.2          85.6
 
 U.S. Demand (bcfd)
 U.S. Exports to Canada                    2.8            3.0          3.0          3.1          2.6
 U.S. Exports to Mexico                    5.6            5.6          5.6          4.8          3.8
 U.S. LNG Exports                          8.1            8.0          8.6          5.1          1.8
 U.S. Commercial                           13.2           10.8         11.5        13.4          12.3
 U.S. Residential                          20.5           16.0         17.4        21.7          19.4
 U.S. Power Plant                          28.7           27.8         27.7        25.1          23.7
 U.S. Industrial                           23.8           23.1         23.3        23.4          22.6
 U.S. Plant Fuel                           4.6            4.6          4.6          4.6          4.7
 U.S. Pipe Distribution                    2.5            2.3          2.3          2.3          2.5
 U.S. Vehicle Fuel                         0.1            0.1          0.1          0.1          0.1
 Total U.S. Consumption                    93.4           84.8         87.0        90.6          85.3
 Total U.S. Demand                        109.9          101.4        104.3        103.6         93.5
                                                                                             
                                                                                             
 SNL U.S. Natural Gas Next-Day Prices ($ per mmBtu)                                          
 Hub                                   Current Day     Prior Day                             
 Henry Hub NG-W-HH-SNL                   1.96           1.91                               
 Transco Z6 New York NG-CG-NY-SNL        1.70           1.56                               
 PG&E Citygate NG-CG-PGE-SNL             2.84           2.62                               
 Dominion South NG-PCN-APP-SNL           1.52           1.49                               
 Chicago Citygate NG-CG-CH-SNL           1.77           1.69                               
 Algonquin Citygate NG-CG-BS-SNL         1.74           1.65                               
 SoCal Citygate NG-SCL-CGT-SNL           2.40           2.25                               
 Waha Hub NG-WAH-WTX-SNL                 1.15           0.93                               
                                                                                             
 SNL U.S. Power Next-Day Prices ($ per megawatt-hour)                                        
 Hub                                   Current Day     Prior Day                             
 New England EL-PK-NPMS-SNL             21.25          19.00                               
 PJM West EL-PK-PJMW-SNL                23.00          23.18                               
 Ercot North EL-PK-ERTN-SNL             29.50          26.00                               
 Mid C EL-PK-MIDC-SNL                   23.75          23.38                               
 Palo Verde EL-PK-PLVD-SNL              27.75          27.75                               
 SP-15 EL-PK-SP15-SNL                   30.75          32.75                               
 
 (Reporting by Scott DiSavino; Editing by Bernadette Baum)
  
 
 
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