US natural gas futures slip; set for weekly loss on milder weather, lower demand

Adds latest prices

By Noel John

Dec 12 (Reuters) - U.S. natural gas futures fell to more than a one-month low on Friday, on track for the first weekly decline in two months, as forecasts for milder weather and lower demand next week along with near-record output and ample amounts of gas in storage pressured prices.

Front-month gas futures for January delivery NGc1 on the New York Mercantile Exchange settled 11.8 cents, or 2.8%, lower at $4.113 per million British thermal units (mmBtu), after hitting a session low of $4.065 - the lowest level since October 31.

The contract is down 22% so far this week.

"Inventories are above average and it's going to warm up dramatically over the Christmas holiday weekend. So now with these forecasts, which is flipping higher, everybody is jumping ship on natural gas," said Phil Flynn, senior analyst for Price Futures Group.

"If the six-to-10-day weather forecast starts to look a little colder, we could see a big rebound in natural gas prices."

The decline occurred despite a federal report showing a bigger-than-expected storage withdrawal last week, when extreme cold boosted the amount of gas consumers burned to heat homes and businesses.

The U.S. Energy Information Administration $(EIA)$ on Thursday said energy firms pulled 177 billion cubic feet (bcf) of gas out of storage during the week ended December 5.

That figure exceeded the 166-bcf withdrawal analysts forecast in a Reuters poll and compared 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

"While yesterday's unusually large storage withdrawal of 177 bcf would have normally prompted a price spike, especially given a dramatic 46% cut in the storage surplus, this market remains primarily focused on the mild temperature outlooks that will be limiting upside price possibilities until the forecasts shift back in the direction of another cold spell," consultancy Ritterbusch & Associates said in a note.

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

LSEG projected average gas demand in the Lower 48 states, including exports, would slide from 142.3 bcfd this week to 126.3 bcfd next week. The forecast for next week was lower than LSEG's outlook on Thursday.

Average gas flows to the eight large U.S. LNG export plants have risen to 18.8 bcfd so far this month, up from a monthly record high of 18.3 bcfd in November.

Elsewhere, Dutch and British gas prices were little changed, finding support from expectations of higher demand as recent warmer weather is set to give way to more seasonally normal temperatures. NG/EU

Asian spot liquefied natural gas prices fell to a 20-month low on ample supplies and mild weather, encouraging some buying from price-sensitive importers.

Meanwhile, China's natural gas consumption will likely expand 5% next year from this year, and consumption by the industrial and city gas sectors is set to grow in coming years, according to forecasts from the research arm of China National Petroleum Corp.

(Reporting by Noel John in Bengaluru; Editing by Paul Simao and Diane Craft)

((Noel.John@thomsonreuters.com;))