U.S. natural gas futures were little changed on Wednesday, pausing after a sharp rally to an eight-month high earlier, as traders weighed mild late-November forecasts against surging export demand and the prospect of colder weather in early December.

Front-month gas futures for December delivery on the New York Mercantile Exchange were steady at $4.56 per million British thermal units (mmBtu) at 9:39 a.m. EST (1428 GMT). The contract had earlier climbed to a session high of $4.582, its highest since March 11.

The recent rally has kept the front-month contract in technically overbought territory for a 10th straight session.

“The recent run-up was partly driven by options sellers covering short positions around the $4.50 mark, and we’re now seeing some mild profit-taking,” said Gary Cunningham, director of market research at Tradition Energy, adding that prices remain “slightly above fundamental support” with continued strength near $4.50.

The market is watching weather models that point to a brief warm spell in late November followed by a potential shift to colder conditions in early December, which could lift gas demand, Cunningham said.

Financial company LSEG expects average gas demand across the Lower 48 U.S. states, including exports, to climb to 119.2 bcfd this week and 118.0 bcfd next week, up from 108.6 bcfd last week, as colder weather drives higher consumption.

LSEG estimated 252 heating degree days (HDDs) over the next two weeks, higher than the 228 estimated on Tuesday. HDDs, which measure the number of degrees a day’s average temperature is below 65 degrees Fahrenheit (18 degrees Celsius), are used to estimate demand to heat homes and businesses.

“The gas market is selling off on what appears to be profit-taking following an early morning test of yesterday’s multi-month high. It is becoming increasingly apparent that a significant portion of this month’s upside price acceleration has been fueled by a record pace of export activity with the associated increase in feedgas demand boosting values at a strong pace,” analysts at energy advisory firm Ritterbusch and Associates said in a note.

The average amount of gas flowing to the eight big U.S. LNG export plants has risen to 17.8 bcfd so far in November, up from a record 16.7 bcfd in October, and those flows are on track to increase further in coming months.

LSEG said average gas output in the Lower 48 states has risen to 109.0 billion cubic feet per day (bcfd) so far in November, up from 107.0 bcfd in October and a record monthly high of 108.0 bcfd in August.

Record output so far this year has allowed energy companies to inject more gas into storage than usual. There was about 4% more gas in storage than normal for this time of year.

“Production gains that have also approached a record pace have thus far been able to provide only a partial offset,” Ritterbusch added.

Meanwhile, global oil and gas demand could grow until 2050, the International Energy Agency said on Wednesday, departing from previous expectations of a speedy transition to cleaner fuels following U.S. criticism about its climate focus.

Dutch and British wholesale gas prices rose early on Wednesday as forecasts for colder weather increased demand.
Source: Reuters