U.S. natural gas futures slid about 2% on Thursday on record U.S. output, rising Canadian exports and forecasts for milder U.S. weather and lower demand over the next two weeks than previously expected.
Prices declined despite a federal report showing a slightly smaller-than-expected U.S. storage build last week, when mild weather limited demand for the fuel for both heating and cooling.
It also defied bullish factors, including a lack of wind power in recent weeks that has forced power generators to burn more gas to produce electricity. Traders said that lack of wind power likely had something to do with last week’s smaller-than-expected storage build.
The U.S. Energy Information Administration (EIA) said utilities added 96 billion cubic feet (bcf) of gas into storage during the week ended May 19.
That was lower than the 100-bcf build analysts forecast in a Reuters poll and compared with an increase of 88 bcf in the same week last year and a five-year (2018-2022) average increase of 96 bcf.
Last week’s increase boosted stockpiles to 2.336 trillion cubic feet (tcf), or 17.0% above the five-year average of 1.996 tcf for that time of year.
The amount of U.S. power generated by wind has dropped to 7% of the total so far this week versus a high of 17% during the week ended April 21, according to federal energy data. That means there will likely be less gas available to go into storage.
The amount of power generated by gas has averaged 41% so far this week, up from a low of 37% during the windy week ended April 21.
On its second-to-last day as the front month, gas futures NGc1 for June delivery on the New York Mercantile Exchange were down 5.5 cents, or 2.3%, to $2.343 per million British thermal units (mmBtu) at 10:38 a.m. EDT (1438 GMT).
In the spot market, mild weather and ample hydropower in the U.S. West pressured next-day gas prices for Thursday at the PG&E Citygate in Northern California to $3.15 per mmBtu, their lowest since August 2020.
SUPPLY AND DEMAND
Data provider Refinitiv said average gas output in the U.S. Lower 48 states has risen to 101.5 billion cubic feet per day (bcfd) so far in May, which would top April’s monthly record of 101.4 bcfd.
The amount of gas exported from Canada to the United States was on track to rise from 7.8 bcfd on Wednesday to a preliminary three-week high of 8.2 bcfd on Thursday, according to Refinitiv, as energy firms continue to ramp up oil and gas production with the easing of wildfires in Alberta and other western provinces.
As the fires raged from May 5-22, the amount of gas flowing from Canada to the U.S. averaged just 7.0 bcfd. That was well below Canada’s average gas exports to the U.S. of 8.3 bcfd so far in 2023 and 9.0 bcfd in 2022. About 8% of the gas consumed in, or exported from, the U.S. comes from Canada.
Meteorologists projected the weather in the Lower 48 states would switch from cooler than normal from May 24-29 to warmer than normal from June 1-2 before returning to mostly near normal from June 3-9.
Refinitiv forecast U.S. gas demand, including exports, would ease from 90.9 bcfd this week to 90.0 bcfd next week. Those forecasts were lower than Refinitiv’s outlook on Wednesday.
Gas flows to the seven big U.S. LNG export plants have fallen from a record 14.0 bcfd in April to an average of 12.9 bcfd so far in May due to maintenance work at several plants, including Cameron LNG in Louisiana and Cheniere Energy Inc’s LNG.A Sabine Pass in Louisiana.
Source: Reuters (Reporting by Scott DiSavino; editing by Barbara Lewis and Paul Simao)