NEW YORK: US natural gas futures dropped on Tuesday on forecasts for heating demand to decline over the next two weeks.

Front-month gas futures fell 7 cents, or 2.4 percent, to settle at $2.896 per million British thermal units.

For the month of October, the front-month declined by almost 4 percent after slipping about 1 percent in September.

The latest forecast calls for warmer, more seasonal temperatures over the next two weeks.

Despite expectations of less heating demand, however, Thomson Reuters on Tuesday forecast US gas consumption would rise to an average of 82.8 billion cubic feet per day (bcfd) next week from 79.7 bcfd this week. That compares with Monday’s forecasts of 81.9 bcfd for next week and 78.4 bcfd this week.

Traders noted most of those increases since Monday’s forecast were related to expectations of small rises on several pipelines transporting gas from the United States to Mexico.

US gas exports overall were expected to average 8.7 bcfd this week, up 47 percent from a year earlier, due primarily to much higher shipments of liquefied natural gas, according to Reuters data.

Production in the lower 48 US states reached a record 75.8 bcfd last week, easily topping the prior high of 75.0 bcfd in September 2015, according to Reuters data. Output so far this week averaged 75.2 bcfd.

Analysts said utilities likely added a near normal 59 billion cubic feet of gas into storage in the week to Oct. 27, which would leave the amount of fuel in inventory about 1.2 percent below the five-year average for this time of year at around 3.8 trillion cubic feet.

That compares with an increase of 56 bcf during the same week a year earlier and the five-year average build of 60 bcf for the period.

Analysts forecast utilities will add just 1.7 tcf of gas into storage during the April-October injection season due in part to low output earlier in the year and rising sales abroad. That is much less than the 2.1 tcf seen on average over the past five years.

If correct, that would leave stockpiles at the end of October at around 3.8 tcf compared with a record high of 4.0 tcf on Oct. 31 last year and a five-year average (2012-2016) of 3.9 tcf.

Some traders noted that unless supply and demand forecasts change, utilities could start pulling gas out of inventory as soon as next week to meet rising heating demand.—Reuters