NEW YORK: US natural gas futures slid about 2% on Friday on lower production reductions than previously expected and forecasts for less warm weather next week.
Prices declined despite an increase in the amount of gas flowing to Freeport LNG’s liquefied natural gas (LNG) export plant in Texas.
Front-month gas futures for October delivery on the New York Mercantile Exchange fell 6.4 cents, or 2.4%, to settle at $2.644 per million British thermal units (mmBtu).
For the week, the front-month was up about 1% after falling about 6% last week.
In an event that will likely cause power outages and reduced electric and gas demand in the US Northeast this weekend, the US National Hurricane Center projected Hurricane Lee would make landfall near the US-Canada border between Maine and New Brunswick/Nova Scotia on Saturday with maximum sustained winds near 75 miles per hour (121 kilometers per hour).
US energy firms this week added the most oil and gas rigs in a week since November, with the count rising for a second week in a row, energy services firm Baker Hughes said in its closely followed report on Friday. The gas count, an early indicator of future output, rose eight to 121 rigs.
Financial firm LSEG said average gas output in the lower 48 US states eased to 102.2 billion cubic feet per day (bcfd) so far in September, down from a record 102.3 bcfd in August.
On a daily basis, however, output was on track to drop about 2.0 bcfd to a preliminary near three-month low of 100.1 bcfd on Friday. That was a smaller output reduction than expected earlier in the week. Energy traders noted preliminary data is often revised later in the day.
Meteorologists forecast the weather in the lower 48 states would remain near normal until around Sept. 23 before turning mostly warmer than usual from Sept. 24-30. Traders, however, said that above normal temperatures in late September were not very hot, with averages of around 72 degrees Fahrenheit (22.2 Celsius) versus a normal of 70 F for that time of year.
With seasonally cooler weather coming, LSEG forecasts US gas demand, including exports, will slide from 100.6 bcfd this week to 96.6 bcfd for the next two weeks. The forecasts for next week were higher than LSEG’s outlook on Thursday due mostly to an expected increase in LNG exports.
Gas flows to the seven big US LNG export plants have averaged 12.7 bcfd so far in September, up from 12.3 bcfd in August. That compares with a monthly record of 14.0 bcfd in April.
On a daily basis, LNG feedgas was on track to reach a near two-week high of 13.3 bcfd on Friday with increased flows to the Freeport plant.
The 2.1-bcfd Freeport facility was on track to pull in about 1.9 bcfd of gas on Friday, up from an average of 0.3 bcfd from Sept. 10-13, according to LSEG data.
Sources told Reuters this week that Freeport had canceled four cargoes since reducing feedgas. In the week before the reduction, the plant was pulling in about 1.8 bcfd of pipeline gas.
Looking ahead, traders noted Berkshire Hathaway Energy’s 0.8-bcfd Cove Point LNG export plant in Maryland was on track to shut for about a week of planned maintenance around Sept. 21-29, according to company notices to customers. Cove Point shuts every year in the autumn for maintenance. In 2022, it shut from around Oct. 1-27, according to LSEG data.
On Thursday, the US natural gas futures were up about 2% after paring earlier gains on a bigger than expected weekly storage build.
Earlier in the day, gas prices were up over 5% on a drop in daily output, a rise in crude futures, forecasts for higher gas demand over the next two weeks than previously expected and signs that Freeport LNG’s liquefied natural gas (LNG) export plant in Texas started to pull in more feedgas.
The US Energy Information Administration (EIA) said utilities added 57 billion cubic feet (bcf) of gas into storage during the week ended Sept. 8.
That was more than the 48-bcf build analysts forecast in a Reuters poll and compares with an increase of 74 bcf in the same week last year and a five-year (2018-2022) average increase of 76 bcf.
Last week’s injection included a 6-bcf build in the South Central region, which includes Texas, where a long-lasting, brutal heat wave caused energy firms to pull gas during the past seven weeks, the longest streak of withdrawals for the region during the summer since 2017.
Even though last week’s build was bigger than expected, analysts said it was still smaller than usual for this time of year because power generators were still burning lots of gas to keep air conditioners humming during the lingering heat wave.
Front-month gas futures for October delivery on the New York Mercantile Exchange rose 4.3 cents, or 1.6%, to $2.723 per million British thermal units at 10:45 a.m. EDT (1445 GMT).
Before EIA released the storage report, gas futures were up about 3.3%. Oil prices climbed about 2% on Thursday to their highest levels since November 2022 on forecasts for tighter supplies for the rest of 2023.
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