US natural gas prices fall on forecasts for less demand, storage oversupply

NEW YORK: US natural gas futures fell about 3% on Wednesday on forecasts for less demand over the next two weeks than expected and an ongoing massive oversupply of gas in storage.

Analysts said stockpiles were around 34% above normal levels for this time of year.

Wednesday’s price decline came despite a continued drop in output.

US gas production has dropped by around 11% so far in 2024 as several energy firms, including EQT and Chesapeake Energy, delayed well completions and cut back on other drilling activities after prices fell to 3-1/2-year lows in February and March.

EQT is currently the biggest US gas producer and Chesapeake is on track to become the biggest producer after its merger with Southwestern Energy.

Front-month gas futures for June delivery on the New York Mercantile Exchange fell 5.6 cents, or 2.8%, to $1.935 per million British thermal units at 9:50 a.m. EDT (1350 GMT).

Financial firm LSEG said gas output in the Lower 48 US states fell to an average of 97.9 billion cubic feet per day (bcfd) in April, down from 100.9 bcfd in March. That compares with a monthly record of 105.6 bcfd in December 2023.

On a daily basis, output was on track to drop by around 2.9 bcfd over the past seven days to a preliminary 15-week low of 94.6 bcfd on Wednesday.

Meteorologists projected weather across the Lower 48 states would remain mostly warmer than normal through May 11 before turning near normal from May 12-16.

LSEG forecast gas demand in the Lower 48, including exports, would ease from 91.5 bcfd this week to 91.3 bcfd next week. Those forecasts were lower than LSEG’s outlook on Tuesday.

Gas flows to the seven big US liquefied natural gas (LNG) export plants slid to an average of 11.9 bcfd in April, down from 13.1 bcfd in March due mostly to ongoing outages at Freeport LNG’s export plant in Texas. That compares with a monthly record of 14.7 bcfd in December.

On a daily basis, LNG feedgas was on track to fall from 12.8 bcfd on Tuesday to a preliminary 11.9 bcfd on Wednesday on signs of a reduction at Cheniere Energy’s Corpus Christi in Texas.

The US became the world’s biggest LNG supplier in 2023, ahead of recent leaders Australia and Qatar, as much higher global prices fed demand for more exports due in part to supply disruptions and sanctions linked to Russia’s war in Ukraine.

Gas was trading around $9 per mmBtu at the Dutch Title Transfer Facility (TTF) benchmark in Europe and $10 at the Japan Korea Marker (JKM) benchmark in Asia.

On Tuesday, US natural gas futures eased, pressured by large storage levels, after marking its best day in over two years in the previous session, helped by forecasts for more demand than previously expected with an increase in feedgas to Freeport LNG’s export plant in Texas.

Front-month gas futures for June delivery on the New York Mercantile Exchange fell by 3.9 cents, or 1.9%, to settle at $1.991 per million British thermal units (mmBtu). Prices marked their best day in over two years in the previous session, and are up around 12% for the month.

“Yesterday, we had a strong rally on expectations of LNG feedgas returning to more normal levels. We have seen a pause in the growth of energy feedgas this morning, so the rallies are taking a moment to catch their breath,” said Gary Cunningham, director of market research at Tradition Energy.

On a daily basis, LNG feedgas was at 12.8 billion cubic feet per day as the amount of gas flowing to Freeport LNG rose to 1.02 bcfd from 0.1 bcfd on Thursday, indicating that at least one of three liquefaction trains at Freeport LNG’s export plant in Texas was exiting an outage.

Financial firm LSEG forecasts gas demand in the Lower 48 states, including exports, to rise to 93.0 bcfd next week, from 92.3 bcfd this week. Gas output in the Lower 48 US states fell to an average of 96.5 bcfd so far in April, down from 100.8 bcfd in March, according to LSEG. That compares with a monthly record of 105.6 bcfd in December 2023.

“The market will still need to contend with some eventual loosening in supplies again, possibly by week’s end, that will force focus back onto a huge storage level,” energy advisory Ritterbusch and Associates said in a note.

“With storage at such a large level, price advances prompted by production slippage and/or a pop in LNG export activity could prove unsustainable across most of next month because such brief shifts in the balances will hardly make a dent in the big supply overhang.”

In the spot market, power and gas prices in many states, including Texas, California and Arizona, have traded below zero several times this spring due to low demand, ample renewable power supplies and pipeline maintenance that has trapped gas in Texas.

Meanwhile, Europe gas prices edged higher as falling demand due to warmer temperatures was offset by lower liquefied natural gas (LNG) supply and curbed flows of gas from Norway due to maintenance.