NEW YORK: US natural gas futures slid to a more than two-week low on Tuesday as forecasts for warmer-than-normal weather through early November curbed expectations for heating demand.
Front-month gas futures for November delivery on the New York Mercantile Exchange traded 6.5 cents lower, or 2.1 percent, at USD2.99 per million British thermal units. The contract touched its lowest level since October 2 earlier in the session.
“This market appears to be focused on unusually mild temperature trends that are now stretching into next month instead of longer-term patterns capable of spiking the winter gas contracts into fresh multi-month highs on first indication of a sustained cold spell,” consultancy Ritterbusch and Associates said in a note.
“The fact that this market is seeing only limited downside reaction to the surge in oil prices is now suggesting some lower for longer gas prices than we had expected.”
Oil advanced on Tuesday, with Brent reaching a five-month high, as traders priced in a geopolitical risk premium from Houthi attacks on Saudi infrastructure and reports of vessel attacks in the Gulf.
With seasonally colder weather coming, financial firm LSEG said average gas demand in the Lower 48 states, including exports, will rise from 106 bcfd this week to 110 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.
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 111.4 bcfd so far in October.
Average gas flows to the nine major US LNG export plants were at 18.2 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.
Europe’s benchmark gas contract traded above €90 per megawatt hour for the first time since December 2022 on Tuesday amid increased global competition for supplies tightened by the US-Iran war ahead of winter.