U.S. natural gas futures fell about 2% to a two-week low on Thursday on forecasts for lower demand next week and expectations power generators will burn less gas after Hurricane Milton knocked out power to millions of homes and businesses in Florida.
Milton slammed into the west coast of Florida as a major storm on Wednesday night and swept across the central part of the state on Thursday.
The storm has already caused over 3.2 million homes and businesses to lose power in Florida. Those outages will add to the roughly 103,000 customers still without service in North Carolina and Georgia since Hurricane Helene moved inland after hitting Florida on Sept. 26.
In 2023, power generators in Florida burned a record 3.9 billion cubic feet per day of gas to keep the lights on for the state’s roughly 11.5 million power customers, according to data from the U.S. Energy Information Administration and PowerOutage.us.
That means every 1 million customer outages reduces the need to burn around 0.3 bcfd of gas on average.
Front-month gas futures NGc1 for November delivery on the New York Mercantile Exchange fell 6.1 cents, or 2.3%, to $2.599 per million British thermal units at 8:02 a.m. EDT (1202 GMT), falling for a fifth day in a row and putting the contract on track for its lowest close since Sept. 26.
That would be the first time the contract dropped for five straight days since late August. During that time, it was down about 12%.
One factor that has weighed on futures prices all year has been low spot or next-day prices at the U.S. Henry Hub benchmark NG-W-HH-SNL in Louisiana.
The spot market has traded below front-month futures for 169 out of 195 trading days so far this year, according to data from financial company LSEG. Next-day prices at the Henry Hub were trading around $2.43 per mmBtu.
Analysts have noted that so long as spot prices remain far enough below front-month futures to cover margin and storage costs, traders should be able to lock in arbitrage profits by buying spot gas, storing it and selling a futures contract.
SUPPLY AND DEMAND
LSEG said average gas output in the Lower 48 U.S. states fell to 101.2 bcfd so far in October, down from 101.8 bcfd in September. That compares with a record 105.5 bcfd in December 2023.
LSEG forecast average gas demand in the Lower 48, including exports, will rise from 96.4 bcfd this week to 96.9 bcfd next week. The forecast for this week was higher than LSEG’s outlook on Wednesday, while the forecast for next week was lower.
Gas flows to the seven big U.S. liquefied natural gas (LNG) export plants slid to an average of 12.4 bcfd so far in October, down from 12.7 bcfd in September. That compares with a monthly record high of 14.7 bcfd in December 2023.
That reduction was due mostly to the planned Sept. 20 shutdown of Berkshire Hathaway Energy’s 0.8-bcfd Cove Point LNG export plant in Maryland for around three weeks of annual maintenance, which could end as soon as Oct. 10.
Source: Reuters (Reporting by Scott DiSavino; Editing by Emelia Sithole-Matarise)