NEW YORK: US natural gas futures slid to a four-week low on Wednesday as forecasts for mild weather through early November curbed expectations for heating consumption, outweighing support from strong LNG export demand.
Front-month gas futures for November delivery on the New York Mercantile Exchange traded 12.7 cents lower, or 4.3 percent, to USD2.84 per million British thermal units. The contract touched its lowest level since September 22 earlier in the session.
“If you couple higher production with a disjointed weather model outlook, there’s not much of a reason here for us to be very bullish in the last 10 or so days of October as we are still injecting gas into storage,” said Robert DiDona, president of Energy Ventures Analysis.
Residential and commercial heating accounts for a large share of US gas demand during colder months. As a result, warmer-than-normal temperatures tend to reduce consumption and pressure prices.
With seasonally colder weather coming, financial firm LSEG said average gas demand in the Lower 48 states, including exports, will rise from 106 bcfd this week to 108 bcfd in the next week.
However, next week’s forecast remains below the five-year average of 117 bcfd, suggesting temperatures will be milder than normal, meaning inventories could continue to build and weigh on prices.
LSEG said average gas output in the US Lower 48 states was down from record highs of 113.3 bcfd in August and September to 111.5 bcfd so far in October.
“We’ve had very strong LNG feed gas demand over the past week or so, but it appears that the mixed weather model outlook and higher production are offsetting the export demand,” DiDona added.
Average gas flows to the nine major US LNG export plants were at 18.2 bcfd so far in October, up from 17.9 bcfd in September and down from a monthly record high of 18.8 bcfd in April.
Elsewhere, Europe’s benchmark wholesale gas prices rose and remained close to a nearly four-year high hit in the previous session as tensions in the Middle East escalate and attacks continue on tankers trying to cross the Strait of Hormuz.
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