U.S. natural gas futures slid about 2% to a fresh two-week low on Friday, putting the contract down for a an eighth day in a row, on record output, ample storage and low spot prices.
That price decline came despite forecasts the weather would turn seasonally cooler through early November, which should boost heating demand, at the same time the amount of gas flowing to liquefied natural gas (LNG) export plants nears record levels.
Front-month gas futures NGc1 for November delivery on the New York Mercantile Exchange fell 5.8 cents, or 2.0%, to $2.899 per million British thermal units (mmBtu) at 9:49 a.m. EDT (1349 GMT), putting the contract on track for its lowest close since Oct. 2.
That also put the front-month down for an eighth day for the first time since October 2019 when it fell for a record 12 days in a row.
For the week the contract was down about 11% after falling about 3% last week. That would be the biggest one-week decline since prices fell about 16% during a week in late May.
One bearish factor that has weighed on the futures market for most of this year has been lower spot or next-day prices at the Henry Hub benchmark in Louisiana. The spot market has traded below front-month futures for 166 out of 201 trading days so far this year, according to data from financial firm LSEG.
Next-day prices at the Henry Hub were down about 3% to around $2.84 per mmBtu for Friday.
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 rose to an average of 103.6 bcfd so far in October, up from 102.6 bcfd in September and a record high of 103.1 bcfd in July.
LSEG forecast U.S. gas demand, including exports, would ease from 97.6 bcfd this week to 96.9 bcfd next week with milder weather coming before soaring to 105.0 bcfd in two weeks once the weather turns seasonally colder. The forecasts for this week and next were similar to LSEG’s outlook on Thursday.
Pipeline exports to Mexico slid to an average of 7.0 bcfd so far in October, down from a monthly record high of 7.2 bcfd in September.
Analysts, however, expect exports to Mexico to rise in coming months once New Fortress Energy’s NFE.O plant in Altamira starts pulling in U.S. gas to turn into liquefied natural gas (LNG) for export in November.
Gas flows to the seven big U.S. LNG export plants rose to 13.6 bcfd so far in October with the return of Berkshire Hathaway Energy’s Cove Point export plant in Maryland from a maintenance outage, up from 12.6 bcfd in September. That compares with a record high of 14.0 bcfd in April.
On a daily basis, LNG feedgas climbed to 14.7 bcfd on Tuesday, the highest since April 2023.
The U.S. is on track to become the world’s biggest LNG supplier in 2023, ahead of recent leaders Australia and Qatar. Much higher global prices have fed demand for U.S. exports due in part to supply disruptions and sanctions linked to the war in Ukraine.
Gas was trading around $16 per mmBtu at both the Dutch Title Transfer Facility (TTF) benchmark in Europe TRNLTTFMc1 and $18 at the Japan Korea Marker (JKM) in Asia.
Source: Reuters (Reporting by Scott DiSavino, Editing by Nick Zieminski)