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Markets

US natgas eases from 21-month high as power generators burn more coal

  • On their second to last day as the front-month, gas futures for November delivery fell 2.3 cents, or 0.8%, to $3.001 per million British thermal units.
  • December futures, which will soon be the front-month, were down six cents to $3.19 per mmBtu.
27 Oct 2020

US natural gas futures eased on Tuesday from a 21-month high in the prior session on forecasts higher prices in November will cause power generators to burn more coal and less gas to produce electricity.

On their second to last day as the front-month, gas futures for November delivery fell 2.3 cents, or 0.8%, to $3.001 per million British thermal units at 9:22 a.m. EDT (1322 GMT). On Monday, the contract closed at its highest since January 2019.

December futures, which will soon be the front-month, were down six cents to $3.19 per mmBtu.

Data provider Refinitiv said output in the Lower 48 US states was on track to drop to 85.8 billion cubic feet per day (bcfd) on Tuesday, down about 2.9 bcfd over the last five days as Gulf Coast producers shut wells ahead of another hurricane - Zeta - expected to hit the region on Wednesday.

The US Bureau of Safety and Environmental Enforcement said energy firms have already shut in about 0.2 bcfd, or 6%, of offshore gas production in the Gulf of Mexico.

Refinitiv projected demand, including exports, would average 97.2 bcfd this week and next as an expected increase in heating demand offsets a decline in power generator usage.

The amount of gas flowing to liquefied natural gas (LNG) export plants averaged 7.4 bcfd so far in October. That would be the most in a month since April and puts exports on track to rise for a third month in a row for the first time since February when feedgas hit a record 8.7 bcfd as rising global gas prices prompt buyers to reverse cargo cancellations.

In the spot market, colder weather boosted next-day gas to its highest since March 2019 at the Waha hub in West Texas, the Henry Hub in Louisiana and Chicago.