US natgas little changed as higher oil prices offset lower demand forecast

• The amount of gas flowing to US LNG export plants eased to 9.1 bcfd on Monday from 9.3 bcfd on Sunday, according to Refinitiv.
• Gas output is expected to average a record 95.3 bcfd in 2020, before falling to 92.6 bcfd in 2021.

US natural gas futures were little changed on Tuesday as a jump in oil prices offset an increase in output and forecasts for milder weather to cut heating demand next week.

Front-month gas futures for May delivery on the New York Mercantile Exchange remained unchanged at $1.694 per million British thermal units at 8:49 a.m. EDT (1249 GMT).

That keeps the contract within a dime of its $1.602 close on March 23, its lowest settle since September 1995.

Oil prices firmed after US President Donald Trump and Russian counterpart Vladimir Putin agreed to talks aimed at stabilizing energy markets, with benchmarks climbing off 18-year lows hit as the coronavirus outbreak cut fuel demand worldwide.

For the month, gas prices were up less than 1pc after falling about 36pc over the prior four months. For the quarter, prices were down about 33pc after falling about 6pc last quarter.

That puts the contract on track for its biggest quarterly loss since the fourth quarter of 2014.

Looking ahead, gas prices in late 2020, and 2021, were trading at much higher levels than the front-month on expectations demand will rise later this year when economic growth is expected to return once governments loosen travel and work restrictions. Calendar 2021, has traded at a premium over calendar 2022, for 14 days and over 2025, for four days.

Even before the coronavirus started to cut global economic growth and demand for energy, gas was trading near its lowest in years as record production and months of mild winter weather enabled utilities to leave more gas in storage, making fuel shortages and price spikes unlikely.

With the coming of spring-like weather, data provider Refinitiv projected gas demand in the US Lower 48 states, including exports, would slide from an average of 98.1 billion cubic feet per day (bcfd) this week to 92.9 bcfd next week.

That compares with Refinitiv's forecast on Monday of 97.9 bcfd this week and 94.9 bcfd next week.

The amount of gas flowing to US LNG export plants eased to 9.1 bcfd on Monday from 9.3 bcfd on Sunday, according to Refinitiv.

Milder weather helped pressure next-day gas at the Henry Hub benchmark in Louisiana to its lowest since March 2016.

Analysts expect US gas stockpiles will hit an all-time high by the end of the 2020, April-October injection season as steps to slow the coronavirus spread cut demand while efforts to reduce new drilling will not prevent output from hitting a record high this year.

Gas output is expected to average a record 95.3 bcfd in 2020, before falling to 92.6 bcfd in 2021.

If correct, that would be the first decline in US production since 2016, and compares with the current all-time annual high of 92.2 bcfd in 2019, according to US Energy Information Administration projections.