NEW YORK: US natural gas futures eased on Wednesday on a small increase in daily output and forecasts for mild weather and less demand next week than previously expected.
Front-month gas futures for November delivery on the New York Mercantile Exchange fell 4.6 cents, or 1.4 percent, to USD3.237 per million British thermal units. On Tuesday, the contract closed at its highest since September 24.
Financial firm LSEG said average gas output in the US Lower 48 states slid from record highs of 113.3 bcfd in August and September to 110.8 bcfd so far in October.
That drop in average output so far in October, which was smaller than the drop projected on Tuesday, was due to a combination of Gulf of Mexico shut-ins from Hurricane Isaias and force majeure incidents and problems on pipelines in Kentucky, Texas, West Virginia and elsewhere in recent weeks.
Record output and mild spring weather earlier this year allowed energy firms to keep the amount of gas in inventory above the five-year (2021-2025) average since March, reaching a high of 7.7 percent above normal in April.
Energy firms had to pull lots of gas out of storage during the hot summer months to fuel power plants needed to keep air conditioners humming, cutting the inventory surplus. About 40 percent of US power generation comes from gas-fired plants.
STORAGE PREDICTIONS
With output cuts in recent weeks, the amount of gas in storage likely fell to 1.6 percent above normal during the week ended October 9, from 2.0 percent above normal in the previous week, according to analyst estimates ahead of Thursday’s weekly federal inventory report.
Looking forward, meteorologists predicted weather across the country would remain mostly milder than normal through October 29, which should keep both heating and cooling demand low.
With seasonally colder weather coming, LSEG said average gas demand in the Lower 48 states, including exports, will rise from 104.3 bcfd this week to 105.5 bcfd next week. The forecast for this week was higher than LSEG’s outlook on Tuesday, while the forecast for next week was lower.
LNG EXPORTS
Average gas flows to the nine major US LNG export plants fell to 17.5 bcfd so far in October, down from 17.9 bcfd in September and a monthly record high of 18.8 bcfd in April.
Around the world, gas traded about USD28 per mmBtu at the Dutch Title Transfer Facility benchmark in Europe, near a 45-month high, and USD26 at the Japan-Korea Marker benchmark in Asia.
Global gas prices have spiked in recent years primarily due to supply disruptions linked to Russia’s invasion of Ukraine in 2022 and the US-Israeli war with Iran this year.
Prices in the US, however, have not reacted much to the war in Iran because the US produces all the gas it consumes domestically and US LNG companies are already liquefying as much fuel as they can.
No matter how high global gas prices go, the US cannot export much more LNG until units under construction enter service in coming months and years.
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