U.S. natural gas futures eased about 1% to a one-week low on Tuesday on rising output and forecasts for mild weather and low heating demand through the start of the new year.
Front-month gas futures NGc1 for January delivery on the New York Mercantile Exchange fell 2.4 cents, or 0.8%, to $3.190 per million British thermal units (mmBtu) by 8:18 a.m. EST (1318 GMT), putting the contract on track for its lowest close since Dec. 10.
Some analysts have said that winter, and the high prices it usually brings, could be over before the season officially starts with the heavily traded March-April “widow maker” spread still trading in unusual contango. That means the April contract is priced higher than the March contract.
March is the last month of the winter storage withdrawal season, and April is the first month of the summer storage injection season. Because gas is primarily a winter heating fuel, summer prices typically do not trade above winter ones.
It is also possible that gas prices have already hit their 2024 peak when they reached an intraday high of $3.56 per mmBtu in November. Over the past five years, prices hit their yearly highs in January 2023, August 2022, October 2021 and 2020, and January 2019.
SUPPLY AND DEMAND
Financial firm LSEG said average gas output in the Lower 48 U.S. states rose to 103.1 billion cubic feet per day (bcfd) so far in December, up from 101.5 bcfd in November. That compares with a record 105.3 bcfd in December 2023.
Meteorologists projected weather in the Lower 48 states would remain mostly warmer than normal through Jan. 1.
But with the weather still turning seasonally colder – it’s colder in early January than early December – LSEG forecast average gas demand in the Lower 48, including exports, would rise from 124.0 bcfd this week to 129.1 bcfd next week. The forecast for this week was lower than LSEG’s outlook on Monday, while its forecast for next week was higher.
The amount of gas flowing to the eight big LNG export plants operating in the U.S. rose to an average of 14.0 bcfd so far in December, up from 13.6 bcfd in November. That compares with a monthly record high of 14.7 bcfd in December 2023.
The U.S. became the world’s biggest LNG supplier in 2023, ahead of recent leaders Australia and Qatar, as much higher global prices feed demand for more exports due in part to supply disruptions and sanctions linked to Russia’s invasion of Ukraine in February 2022.
Gas prices were trading around $13 per mmBtu at both the Dutch Title Transfer Facility (TTF) benchmark in Europe and the Japan-Korea Marker (JKM) JKMc1 benchmark in Asia. For JKM, that is a four-month low.
Source: Reuters (Reporting by Scott DiSavino; Editing by Kirsten Donovan)