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Markets

US natgas futures fall on record production, less cold forecasts  

The amount of gas in inventory was as much as 33pc below the five-year average in March 2019. Gas production i
21 Oct 2019
  • The amount of gas in inventory was as much as 33pc below the five-year average in March 2019.
  • Gas production in the Lower 48 states eased to 94.3 bcfd on Sunday from a record 94.4 bcfd on Saturday.

US natural gas futures fell on Monday to their lowest in a week as production hit a record high and on forecasts for less cold weather and lower than previously expected heating demand next week.

Front-month gas futures for November delivery on the New York Mercantile Exchange fell 8.2 cents, or 3.5pc, to settle at $2.238 per million British thermal units (mmBtu), their lowest since Oct. 11.

Speculators last week cut their long positions on the NYMEX to their lowest since January 2009, after stockpiles returned to normal levels for the first time in more than two years.

Over the next six to 14 days, the US National Weather Service forecast temperatures in the Lower 48 US states would remain colder than usual in most of the country - just not as cold as previously expected.

Refinitiv projected average gas demand in the Lower 48 states, including exports, would only rise to 92.6 billion cubic feet per day (bcfd) next week, down from its forecast on Friday of 96.5 bcfd after meteorologists moderated their cold outlooks.

That compares with expected average demand of 86.4 bcfd this week, up from Refinitiv's 85.5-bcfd forecast for the week on Friday.

Analysts said utilities likely added a bigger-than-usual 91 billion cubic feet (bcf) of gas to storage during the week ended Oct. 18.

That compares with an injection of 62 bcf during the same week last year and a five-year (2014-18) average build of 73 bcf for the period.

The increase for the week of Oct. 18 is expected to further that surplus to 3.610 trillion cubic feet, topping the five-year average of 3.578 tcf by 0.9pc.

The amount of gas in inventory was as much as 33pc below the five-year average in March 2019. But with production close to a record high, analysts said stockpiles should end the summer injection season above normal levels of around 3.7 tcf on Oct. 31.

Gas production in the Lower 48 states eased to 94.3 bcfd on Sunday from a record 94.4 bcfd on Saturday, according to Refinitiv data. That compares with an average of 93.8 bcfd last week.

In the spot market, next-day gas for Monday at the Waha Hub in West Texas collapsed over 40pc to 69 cents per mmBtu.

Analysts at Goldman Sachs said part of the decline was due to concern that gas would be stranded in the Permian basin next year due to a delay in Kinder Morgan Inc's Permian Highway from October 2020, to early 2021.

That delay would reduce the amount of gas the Permian can produce in late 2020. Production in the Permian is expected to rise about 2 bcfd between the summer of 2019 and the summer of 2020, after another Kinder Morgan pipe, Gulf Coast Express, entered service in September.