The latest weather forecasts showed temperatures across much of the United States would remain below normal through Monday before becoming mostly warmer than usual through the end of March. Traders said those warmer-than-normal forecasts through the end of winter caused the front-month to collapse by more than 10 percent on Tuesday, its biggest daily percentage loss in almost three years.
Changing winter forecasts have also had a major impact on the March-April spread over the past couple of months. The premium of March over April soared from 2.1 cents on November 11 to 24 cents on December 9 before plunging 78 percent in the seven trading days through December 20 to a low of 5.4 cents.
It tripled to a high of 17.8 cents by December 28 and then dropped by 82 percent in just three days to 3.2 cents on Tuesday. The spread was 3.7 cents early on Wednesday. Thomson Reuters projected the cold expected over the next several days would boost US gas demand to 99.8 billion cubic feet per day this week and 110.8 bcfd next week from an average of 90.9 bcfd last week. In early forecasts, analysts said utilities pulled 82 billion cubic feet of gas from storage during the warmer-than-normal holiday week that ended on December 30.
That would be the smallest draw for that week since 2011 and compares with declines of 237 bcf in the prior week, 98 bcf a year earlier and a five-year average of 107 bcf for the week. Analysts said the amount of gas in storage would likely decline more quickly than normal this winter in part because drillers were producing less of the fuel. US output averaged 70.8 bcfd over the past 30 days, compared with 72.7 bcfd a year earlier, 72.4 bcfd for the same period in 2015 and 66.5 bcfd in 2014, according to Reuters data.
In the past week, however, production rose to 71.3 bcfd, with prices in the Marcellus and Utica shale basins in Pennsylvania, Ohio and West Virginia neaar their highest in two years.