NEW YORK: US natural gas futures climbed about 2 percent to a fresh one-week high on Wednesday on a drop in output due to pipeline problems in recent weeks and worries a storm in the Gulf of Mexico could cause further supply disruptions.
Front-month gas futures for November delivery on the New York Mercantile Exchange rose 5.1 cents, or 1.6 percent, to USD3.165 per million British thermal units (mmBtu), putting the contract on track for its highest close since September 25 for a fourth day in a row.
In a sign the market is not too worried about gas supplies this winter, however, the premium of futures for December over November fell to a record low of around 29 cents per mmBtu.
In the Gulf of Mexico, the US National Hurricane Center forecast Tropical Storm Isaias would strengthen into a hurricane over the next 24 hours before hitting the Gulf Coast near the borders of Mississippi, Alabama and Florida early Saturday morning.
Even though storms can boost US gas prices by cutting output along the US Gulf Coast, analysts have noted that storms are more likely to reduce prices and gas demand by shutting liquefied natural gas export plants and knocking out power to homes and businesses. About 40 percent of US power generation comes from gas-fired plants.
That’s because most US production comes from shale formations located far from the Gulf Coast like the Marcellus/Utica in Pennsylvania, Ohio and West Virginia and the Permian in West Texas and eastern New Mexico.
Just 2 percent or 1.9 billion cubic feet per day (bcfd) of the 118.4 bcfd of US marketed gas production in 2025 came from the federal offshore Gulf of Mexico, according to the US Energy Information Administration.
Supply And Demand
Financial firm LSEG said average gas output in the US Lower 48 states slid from record highs of 113.3 bcfd in both August and September to 111.5 bcfd so far in October due in part to forces majeures and other problems on pipelines in Kentucky, Texas, West Virginia and elsewhere in recent weeks.
LSEG said average gas demand in the Lower 48 states, including exports, will slide from 105.4 bcfd this week to 104.1 bcfd next week. Those forecasts were lower than LSEG’s outlook on Tuesday.
Average gas flows to the nine large US LNG export plants fell to 16.9 bcfd so far in October, down from 17.9 bcfd in September and the monthly record high of 18.8 bcfd in April.
On a daily basis, however, LNG feedgas was on track to rise to a one-week high of 17.6 bcfd on Wednesday with the amount of gas flowing to Freeport LNG in Texas expected to rise.
Flows to Freeport had been expected to rise on Monday and Tuesday, but so far that was delayed until Wednesday, according to the latest LSEG data.