NYMEX February natural gas futures settled 13 cents lower at $2.139/MMBtu Thursday as bearish storage data helped push the February contract to its lowest level since it rolled into the prompt-month position.
US natural gas in storage dropped 168 Bcf to 3.475 Tcf for the week ended January 8, the Energy Information Administration said Thursday, less than consensus expectations of a withdrawal of between 176 Bcf and 180 Bcf.
The February contract falling below support at $2.20/MMBtu is a bearish sign, and Thursday's storage number tells two things about market conditions, said Aaron Calder, an analyst with Gelber & Associates.
"First that power generation demand has fallen off with higher prices," Calder said in a market note. "The second is that the relatively large withdrawal seen last week was almost entirely a product of freeze-offs and low prices, and the market is not likely to see undersupply like that again without extremely cold temperatures."
WSI's updated 11- to 15-day forecast showed the expansion of near-normal to above-average temperatures across the eastern two-thirds of the nation. Near-normal to slightly below-average temperatures will be held to the southwestern US, WSI said. The forecast was generally warmer than Wednesday's.
Tudor, Pickering, Holt said in its "Energy Thoughts" market note Thursday that despite dynamic coal-to-gas switching, the warmer-than-normal weather has moved storage to well above normal levels.
"For 2016, this El Nino-induced storage overhang will require another bout of coal to gas market share gains to clean-up storage overhang," the note said. "We expect the gas market to continue its dynamic price response to out-of-bound storage levels. Price likely to remain around the $2/MMBtu mark until overhang is largely removed."
The February contract traded between $2.126/MMBtu and $2.294/MMBtu during the session.
The NYMEX settlement is considered preliminary and subject to change until a final settlement price is posted at 7 pm EST (2400 GMT).
