Floundering natural gas demand from the US residential-commercial sector in February, now forecast to continue through mid-March, is making a final gasp of winter weather-driven demand look increasingly unlikely this season.
On Wednesday, US heating demand sank to its lowest since mid-February at an estimated 31.4 Bcf/d. It was a fitting end to a disappointing month for the US residential-commercial sector.
In February, homes and businesses consumed an average 40.2 Bcf/d, underperforming the five-year average by over 5 Bcf/d, S&P Global Platts Analytics data shows.
Looking ahead, demand during the first week of March is currently forecast to average just over 35 Bcf/d, widening its shortfall to the five-year average to roughly 7 Bcf/d.
On Wednesday, a forecast published by the US National Weather Service showed that trend is likely to continue through the second week of March. In its eight- to 14-day outlook, the agency called for temperatures at or slightly below normal across most the Northeast and the Midwest, where heating demand is most sensitive to colder weather.
Data from Custom Weather appeared to support that outlook, calling for US population-weighted temperatures to average just over 46 degrees Fahrenheit, less than 1 degree cooler than during the first week of March. WEATHER FORECASTS PUNISH SPOT GAS, NYMEX FUTURES PRICES
Over a short 10-day period from late January to mid-February, increasingly bearish weather forecasts led a near-$1/MMBtu decline in benchmark spot prices at the Henry Hub.
On the NYMEX, the March futures contract saw a similar decline over that period, trading into the low-$2.50s/MMBtu, after opening the trading month at nearly $3.20/MMBtu.
Looking ahead, the April contract has continued to flounder, closing Wednesday just cents above the settlement price for March gas at $2.639/MMBtu, data from NYMEX showed.
As the shoulder season approaches, futures and forward markets are already betting that gas prices in the low-$2.60s to mid-$2.70s/MMBtu will endure through June. EARLY-WINTER STORMS COULD STILL HAVE PRICE IMPACT
From late December through mid-January a series of winter storms that swept that Northeastern Seaboard and the US Midwest, drove gas demand to record highs.
On January 1, a blast of Arctic air that arrived just ahead of the now infamous "bomb cyclone" lifted total US gas demand to a single-day record high at more than 147 Bcf/d, Platts Analytics data showed.
Frigid temperatures continued setting record-demand days most notably in early January, but also into the second week of the month.
For the week ending January 5, the US Energy Information Administration reported the largest-ever 359 Bcf withdrawal from US gas inventories. That pull was subsequently followed by bullish, consecutive draws of 188 Bcf and 288 Bcf, nearly dropping stocks to a 500 Bcf deficit to the five-year average.
While more modest withdrawals have followed in recent weeks, inventories still remain at a more than 600-Bcf deficit to 2017 levels, making incremental storage-injection demand in the approaching shoulder and summer seasons a potential source of price bullishness that has yet to materialize.
