U.S. natural gas futures slid about 3% on Tuesday on rising output, forecasts for milder weather and lower heating demand than previously expected and a decline in the amount of gas flowing to liquefied natural gas (LNG) export plants to a one-month low.
Front-month gas futures NGc1 for January delivery on the New York Mercantile Exchange fell 8.6 cents, or 2.7%, to $3.096 per million British thermal units (mmBtu) at 8:14 a.m. EST (1314 GMT).
Some analysts have said that winter, and the high prices it usually brings, could be over before the season officially starts now that the heavily traded March-April “widow maker” spread is 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 possible that gas prices hit their 2024 peak in November when they reached $3.56 per mmBtu. Over the past five years, prices hit their yearly highs in January 2023, August 2022, October 2021 and 2020, and January 2019.
In the spot market, the combination of new pipelines like the Matterhorn and cold weather in West Texas helped boost next-day gas prices at the Waha hub NG-WAH-WTX-SNL in the Permian shale, the nation’s biggest oil-producing basin, to their highest since January.
New pipelines this year enabled Permian producers to move more gas that had been trapped by constrained pipes out of the basin. Those constraints caused gas prices at the Waha to fall into negative territory a record number of times this year.
SUPPLY AND DEMAND
Financial firm LSEG said average gas output in the Lower 48 U.S. states rose to 102.7 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 the weather in the Lower 48 states would remain mostly warmer than normal through Dec. 25.
With warmer weather coming, LSEG forecast average gas demand in the Lower 48, including exports, would drop from 128.6 bcfd this week to 121.3 bcfd next week. Those forecasts were lower than LSEG’s outlook on Monday.
The amount of gas flowing to the seven big operating U.S. LNG export plants 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.
On a daily basis, LNG feedgas fell to a one-month low of 13.2 bcfd on Monday due mostly to a drop in flows to Cheniere Energy’s LNG.N 4.5-bcfd Sabine Pass plant in Louisiana to a one-month low of 4.2 bcfd. That compares with average flows to Sabine of 4.8 bcfd over the past seven days.
Source: Reuters (Reporting by Scott DiSavino, Editing by Christina Fincher)