U.S. natural gas futures on Tuesday held near a three-month low on near record output and forecasts for continued milder-than-normal weather that will allow utilities to keep injecting more gas into storage than usual in coming weeks.
Source: Reuters
Recent drops in demand from storm-related power outages and reduced liquefied natural gas (LNG) exports have also weighed on gas prices.
Hurricane Ian left more than 4 million homes and businesses in Florida and 1.1 million in North and South Carolina without power after hitting Florida in late September. It took utilities in Florida more than a week to restore power to some customers in the hardest hit areas.
Gas demand was also reduced by outages at LNG export plants, including Berkshire Hathaway Energy’s 0.8-billion-cubic-feet-per-day (bcfd) Cove Point in Maryland for about three weeks of planned work starting Oct. 1 and Freeport LNG’s 2.0-bcfd plant in Texas for unplanned work after an explosion on June 8. Freeport LNG expects the facility to return to at least partial service in early to mid-November.
Front-month gas futures NGc1 for November delivery were down 2.1 cents, or 0.3%, to $6.414 per million British thermal units (mmBtu) at 8:47 a.m. EDT (1247 GMT), putting the contract on track for its lowest close since July 12 for a second day in a row.
The premium of futures for December 2022 over November 2022 NGX22-Z22 doubled over the past few weeks to 36 cents per mmBtu, the highest since October 2010 for a second straight day, while the premium of futures for November 2023 over October 2023 NGV23-X23 jumped to a record 36 cents.
Despite recent declines, U.S. futures are still up about 72% so far this year as soaring global gas prices feed demand for U.S. exports due to supply disruptions and sanctions linked to Russia’s Feb. 24 invasion of Ukraine.
Gas was trading around $46 per mmBtu in Europe TRNLTTFMc1 and $34 in Asia JKMc1. NG/EU
Russian gas exports via the three main lines into Germany – Nord Stream 1 (Russia-Germany), Yamal (Russia-Belarus-Poland-Germany) and the Russia-Ukraine-Slovakia-Czech Republic-Germany route – have averaged just 1.3 bcfd so far in October, the same as September but well below the 9.2 bcfd seen in October 2021.
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U.S. gas futures lag far behind global prices because the United States is the world’s top producer with all the fuel it needs for domestic use, while capacity constraints and the Freeport outage prevent the country from exporting more LNG.
Data provider Refinitiv said average gas output in the U.S. Lower 48 states have risen to 100.1 bcfd so far in October, up from a monthly record of 99.4 bcfd in September.
With cooler weather coming, Refinitiv projected average U.S. gas demand, including exports, would rise from 92.6 bcfd this week to 96.1 bcfd next week. Those forecasts were higher than Refinitiv’s outlook on Monday.
The average amount of gas flowing to U.S. LNG export plants has fallen to 10.8 bcfd so far in October from 11.5 bcfd in September. That compares with a monthly record of 12.9 bcfd in March. The seven big U.S. export plants can turn about 13.8 bcfd of gas into LNG.
