NEW YORK: US natural gas futures fell on Monday as forecasts for milder October weather reduced expectations for heating demand, outweighing support from below-expected storage builds, robust LNG demand and lower domestic output.
Front-month gas futures for November delivery on the New York Mercantile Exchange traded 4.9 cents lower, or 1.6 percent, to USD3.07 per million British thermal units.
Prices are down due to the “short-term demand expectations, and they’ve been going up and down with the weather right now,” said Phil Flynn, senior analyst at Price Futures Group.
“We’re moving toward more mild forecasts in October, so that’s weighing on demand ideas a little bit, though LNG demand continues to be strong,” Flynn added.
Weather is a key driver of natural gas prices because it affects heating and cooling demand. Forecasts for milder temperatures tend to weigh on prices by reducing expected gas consumption, while colder weather can lift prices by increasing demand for heating fuel.
With seasonally colder weather coming, LSEG said average gas demand in the Lower 48 states, including exports, will rise from 106 bcfd this week to 108.4 bcfd in the next week. However, next week’s forecast remains below the five-year average of 117 bcfd, suggesting temperatures will be milder than normal.
US natural gas stockpiles rose by 67 billion cubic feet last week, less than the 76-bcf build expected by analysts, a sign of tighter market fundamentals that supported prices.
Financial firm LSEG said average gas output in the US Lower 48 states was down from record highs of 113.3 bcfd in August and September to 111.3 bcfd so far in October.
Average gas flows to the nine major US LNG export plants slid to 18.1 bcfd so far in October, up from 17.9 bcfd in September and down from a monthly record high of 18.8 bcfd in April.
Benchmark Dutch and British wholesale gas prices hit their highest in nearly four years on Monday as shipping attacks in the Middle East limit global liquefied natural gas (LNG) supply while colder weather is forecast for the next two weeks.