NEW YORK: US natural gas futures fell 2 percent on Friday on rising output in recent days and forecasts for milder weather and lower demand than previously expected next week.
Front-month gas futures for December delivery on the New York Mercantile Exchange fell 5.4 cents, or 2 percent, to settle at USD2.898 per million British thermal units (mmBtu). On Thursday, the December contract, which started as the front-month at a higher price than the November contract’s expiration price on Wednesday, closed at its highest price since October 20.
For the week, the contract was up about 10 percent after falling 15 percent last week. For the month, the contract was down about 4 percent after rising 3 percent in September.
In a sign that the market is not too worried about gas supplies this winter, the premium of March 2027 futures over April 2027 futures fell to a record low of around 5 cents per mmBtu.
March is the last month of the winter season, when demand is usually high and utilities pull gas from storage to heat homes and businesses.
Analysts say March should never trade below April, the first month of the summer season, when demand is usually low and energy firms produce enough gas to inject into storage for the next winter.
The industry calls the March-April spread the “widow-maker” because rapid price moves resulting from changing weather forecasts have forced some speculators out of business. Notably, the Amaranth hedge fund lost more than USD6 billion in 2006.
The market does not appear too worried about supply meeting demand for all of next year either, with the Calendar 2027 futures strip falling to a 59-month low of USD3 per mmBtu.
Financial firm LSEG said average gas output in the US Lower 48 states has slid to 112.1 billion cubic feet per day (bcfd) so far in October, down from record highs of 113.3 bcfd in both August and September.
On a daily basis, however, output has rebounded to an average of around 113.5 bcfd over the past two weeks.
With seasonally colder weather coming, LSEG said average gas demand in the Lower 48 states, including exports, would rise from 106.3 bcfd this week to 108.3 bcfd next week and 114.7 bcfd in two weeks. The forecast for next week was lower than LSEG’s outlook on Thursday.
Average gas flows to the nine major US LNG export plants have risen to 18.4 bcfd so far in October, up from 17.9 bcfd in September. That figure is still below the monthly record high of 18.8 bcfd in April.
On a daily basis, meanwhile, LNG feedgas has increased to an average of around 19.2 bcfd over the past two weeks.
Comments