NEW YORK: US natural gas futures edged up about 1% on Friday on expectations output will remain low in coming weeks as drillers continue to cut gas rigs.
Prices increased despite forecasts for milder weather and lower demand next week than previously expected, negative spot power and gas prices in parts of Texas, California and Arizona over the past week and ample amounts of gas in storage.
Front-month gas futures for May delivery on the New York Mercantile Exchange rose 1.1 cents, or 0.6%, to settle at $1.785 per million British thermal units (mmBtu). On Thursday, the contract closed at its lowest since March 28.
That put the front-month up about 1% for the week, its third weekly increase in a row for the first time since June 2023.
Analysts projected gas stockpiles were about 37% above normal levels for this time of year.
A drop in gas prices to a 3-1/2-year low earlier this year has prompted drillers to cut the number of gas rigs operating in gas producing basins like the Haynesville shale in Louisiana, Texas and Arkansas.
Baker Hughes said the Haynesville lost two rigs this week, leaving just 34 rigs active, the lowest since August 2020.
In other news, Chesapeake Energy and Southwestern Energy pushed back the closing date of their proposed $7.4 billion merger to the second half of the year after receiving a US regulator’s second request for information.
In the US Northeast, more than 331,000 homes and businesses were still without power on Friday - mostly in Maine - due to storms over the past few days, according to PowerOutage.us. That was down from around 645,000 Thursday afternoon.
Power outages reduce demand for gas, at least temporarily, since generators don’t have to burn as much fuel to produce electricity.
A 4.8-magnitude earthquake struck near New York City Friday morning, the US Geological Survey said, shaking buildings up and down the East Coast and surprising residents in an area that rarely experiences notable seismic activity.
Electric grids across the US were preparing for a rapid decline in solar generation during a total solar eclipse on Monday, April 8, which will span multiple states.
In the spot market, the value of gas at the Waha Hub in the Permian basin in West Texas turned negative, marking the third time daily prices in the top US shale basin have closed below zero over the past month.
Weather forecasters at Colorado State University predicted an “extremely active” 2024 Atlantic hurricane season. Hurricanes can be both bullish and bearish for gas prices.
The storms are bearish for gas prices if they knock out power to millions of customers, reducing demand for gas for power generation, but they can also be bullish for prices if they hit gas producing regions and shut or damage pipes, wells and other infrastructure.
Financial firm LSEG said gas output in the Lower 48 US states has fallen to an average of 99.1 billion cubic feet per day (bcfd) so far in April, down from 100.8 bcfd in March. That compares with a monthly record high of 105.6 bcfd in December 2023.
Meteorologists projected weather across the Lower 48 would remain cooler than normal through April 7 before turning warmer than normal from April 8-20.
With the warmer weather coming, LSEG forecast gas demand in the Lower 48, including exports, would fall from 104.3 bcfd this week to 102.5 bcfd next week and 97.4 bcfd in two weeks. The forecast for next week was lower than LSEG’s outlook on Thursday.
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