NEW YORK: US natural gas futures held near a one-week low on Tuesday on record output so far this month and forecasts for milder weather and less demand next week than previously expected.
Front-month gas futures for October delivery on the New York Mercantile Exchange rose 0.6 cent, or 0.2percent, to USD2.842 per million British thermal units. On Monday, the contract closed at its lowest price since September 11.
Looking ahead, futures for calendar 2027 fell to an average of USD3.29 per mmBtu, their lowest price since February 2022.
In another sign the market is not too worried about gas supplies this winter, the premium of futures for March over April 2027 fell to a record low of around 10 cents per mmBtu.
Analysts say March, the last month of the peak winter heating season, when utilities pull gas out of storage to meet demand, should never trade below April, the first month of the summer air conditioning season, when energy firms produce enough gas to meet demand and inject fuel into storage for the next winter.
The industry calls the March-April spread the “widow-maker” because rapid price moves resulting from changing weather forecasts have forced some speculators out of business. Notably, the Amaranth hedge fund lost more than USD6 billion in 2006.
Financial firm LSEG said average gas output in the US Lower 48 states has risen to 113.0 billion cubic feet per day (bcfd) so far in September, up from a monthly record high of 112.2 bcfd in August.
On a daily basis, however, output was on track to fall to an 11-week low of 109.8 bcfd on Tuesday due mostly to declines in Louisiana and North Dakota.
Record output and mild spring weather have allowed energy firms to keep the amount of gas in inventory above the five-year (2021-2025) average since March, reaching a high of 7.7percent above normal in April.
But hotter-than-normal weather over the summer forced energy firms to pull lots of fuel from storage to produce power to keep air conditioners working, cutting the inventory surplus. About 40percent of US power generation comes from gas-fired plants.
With the weather remaining hot last week, analysts predicted the amount of gas in storage slid to 3.0percent above normal during the week ended September 18, down from 3.7percent above normal in the previous week, according to estimates ahead of Thursday’s weekly federal inventory report.
Meteorologists forecast the weather would turn from mostly warmer than normal in recent weeks to mostly near normal through October 7.
LSEG said average gas demand in the Lower 48 states, including exports, is expected to slide from 107.7 bcfd this week to 104.1 bcfd next week. The forecast for next week was lower than LSEG’s outlook on Monday.
Average gas flows to the nine big US LNG export plants have risen to 18.0 bcfd so far in September, up from 17.2 bcfd in August, but remained short of the monthly record high of 18.8 bcfd in April.
The increase in average LNG feedgas so far in September occurred despite the shutdown of US energy firm Berkshire Hathaway Energy’s 0.8-bcfd Cove Point LNG export plant in Maryland on September 19 for a few weeks of planned annual maintenance.
Around the world, gas traded near USD23 per mmBtu at the Dutch Title Transfer Facility benchmark in Europe and USD26 at the Japan-Korea Marker benchmark in Asia.
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