U.S. Natural Gas Futures Drop to Lowest Levels in Three Weeks Amidst Lower Heating Demand

(Reuters) - U.S. natural gas futures dropped 7% on Friday, March 17, to their lowest level in three weeks on forecasts for milder weather and lower heating demand than previously expected.

Front-month gas futures for April delivery fell 17.6 cents, or 7%, to settle at $2.338 per million British thermal units (mmBtu). The contract was down 3.2% this week after dropping 19% last week.

The weather outlook for later in March has shifted from colder than normal along the eastern seaboard to slightly warmer than normal, reducing the expectation of late season heating demand, said Gary Cunningham, Director of Market Research at Tradition Energy.

Data provider Refinitiv estimated 275 heating degree days (HDDs) over the next two weeks, down from the 281 HDDs estimated on Thursday, March 16.

HDDs estimate demand to heat homes and businesses by measuring the number of degrees a day's average temperature is below 65 degrees Fahrenheit.

"We are expecting gas demand for power generation this summer to set new records as switch-over from dirtier fuels (coal) to natural gas continues to be the trend here in the U.S.," Cunningham said.

Refinitiv forecasted that U.S. gas demand, including exports, would slide from 116.9 bcfd this week to 108.0 bcfd next week.

Meanwhile, overall risk sentiment remained weak. Wall Street's main indexes fell on Friday as investors remained wary about a potential banking crisis.

The U.S. Energy Information Administration (EIA) on Thursday said utilities pulled 58 billion cubic feet (bcf) of gas from storage during the week ended March 10, which was lower than the 62-bcf withdrawal analysts forecast in a Reuters poll and compared with a decrease of 86 bcf in the same week last year and a five-year (2018-2022) average decline of 77 bcf.

Meanwhile, gas flows to LNG export plants have been on track to hit record highs since Freeport LNG's export plant in Texas exited an eight-month outage in February. The plant was shut due to a fire in June 2022.

Federal regulators approved the restart of two of Freeport LNG's three liquefaction trains in February and the third train on March 8. Liquefaction trains turn gas into LNG.

When operating at full power, Freeport LNG, the second-biggest U.S. LNG export plant, can turn about 2.1 bcfd of gas into LNG for export.

The seven big U.S. LNG export plants, including Freeport LNG, can turn about 13.8 bcfd of gas into LNG.

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