U.S. natural gas futures slid about 3% to a one-week low on Wednesday on a smaller-than-expected output decline this week and forecasts for lower-than-expected demand next week due primarily to a reduction in gas flows to liquefied natural gas export plants during the spring maintenance season.
Gas futures for June delivery on the New York Mercantile Exchange were down 9.7 cents, or 2.7%, to $3.55 per million British thermal units at 8:50 a.m. EDT (1250 GMT), putting the contract on track for its lowest close since May 6.
Despite a heat wave coming to Texas this week, analysts said heating and cooling demand should remain low across much of the rest of the country in the coming weeks, allowing utilities to keep injecting more gas into storage than normal for this time of year.
Gas stockpiles are currently about 3% above the five-year (2020-2024) normal.
Looking ahead, analysts said the roughly 11% drop in U.S. crude futures so far in 2025 should prompt drillers to cut back on oil production.
Any decline in oil production would also reduce the amount of gas pulled out of the ground that is associated with that oil output. About 37% of U.S. gas production comes from associated gas, according to federal energy data.
Over time, analysts said any reduction in associated gas output should increase gas prices.
SUPPLY AND DEMAND
Financial firm LSEG said average gas output in the Lower 48 U.S. states has fallen to 103.7 billion cubic feet per day so far in May, down from a monthly record of 105.8 bcfd in April.
On a daily basis, gas output was on track to drop from a record 107.4 bcfd on April 18 to a preliminary 11-week low of 102.4 bcfd on Wednesday. That decline, however, was less than projected on Tuesday. Analysts have noted that preliminary data is often revised later in the day.
Meteorologists projected temperatures in the Lower 48 states would remain mostly warmer than normal through May 29.
After hitting 90 degrees Fahrenheit (32.2 Celsius) on Tuesday, AccuWeather meteorologists forecast temperatures in Houston, the biggest city in Texas, would reach 95 F on Wednesday, breaking the May 14 record high of 91 F set in 1961, and would keep reaching the 90s F every day from May 13-26. The normal high in the city at this time of year is 86 F.
As homes and businesses crank up their air conditioners in Texas, LSEG forecast average gas demand in the Lower 48, including exports, will rise from 96.4 bcfd this week to 97.0 bcfd next week. The forecasts for next week were lower than LSEG’s outlook on Tuesday.
The average amount of gas flowing to the eight big LNG export plants operating in the U.S. has fallen to 15.1 bcfd so far in May, down from a monthly record of 16.0 bcfd in April.
The LNG feedgas decline so far this month was mostly due to reductions for maintenance at Cameron LNG’s 2.0-bcfd plant in Louisiana and Cheniere Energy’s 3.9-bcfd Corpus Christi plant under construction and in operation in Texas, and a one-day outage at Freeport LNG’s 2.1-bcfd plant in Texas on May 6.
LNG gas flows to the Corpus Christi facility were on track to drop to a two-month low of 1.5 bcfd on Wednesday, down from 1.6 bcfd on Tuesday and an average of 2.0 bcfd during the prior seven days, according to LSEG data.
Source: Reuters