U.S. natural gas futures edged up about 1% on Wednesday on forecasts for higher demand over the next two weeks than previously expected and a continued reduction in output ahead of Tropical Storm Helene.
The U.S. National Hurricane Center (NHC) forecast Helene would strengthen into a major hurricane as it marches across the Gulf of Mexico before hitting the Florida Panhandle late on Thursday.
Although storms are more likely to reduce gas demand and prices through power outages and shutting of liquefied natural gas (LNG) export plants, analysts said this storm was on track to miss the LNG plants.
That means demand for gas from those LNG export plants should remain high at the same time that some Gulf Coast producers have cut output ahead of the storm.
More than 75% of U.S. gas production still comes from big inland shale basins like Appalachia in Pennsylvania, West Virginia and Ohio and the Permian in West Texas and eastern New Mexico, so most of the country’s gas output should remain safe from the storm.
On its second to last day as the front-month, gas futures NGc1 for October delivery on the New York Mercantile Exchange were up 3.2 cents, or 1.3%, to $2.583 per million British thermal units (mmBtu) at 7:47 a.m. EDT (1147 GMT).
That small price move higher pushed the front-month back into technically overbought territory for the second time this week. Prices were also technically overbought on Monday.
SUPPLY AND DEMAND
LSEG said gas output in the Lower 48 U.S. states has slid to an average of 102.0 billion cubic feet per day (bcfd) so far in September, down from 103.2 bcfd in August.
But on a daily basis, output was on track to drop by around 2.6 bcfd over the past five days to a preliminary three-month low of 100.2 bcfd. Analysts, however, noted preliminary data was often revised later in the day.
Analysts said recent output reductions were partly due to producers curtailing Gulf of Mexico oil and gas production ahead of Helene and lower flows on a Natural Gas Pipeline Co (NGPL) pipe in Texas after a force majeure event at a compressor.
With milder autumn weather coming, LSEG forecast average gas demand in the Lower 48 states, including exports, will slide from 98.8 bcfd this week to 97.6 bcfd next week. Those forecasts were higher than LSEG’s outlook on Tuesday.
Gas flows to the seven big U.S. LNG export plants have eased to an average of 12.8 bcfd so far in September, down from 12.9 bcfd in August. 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.
Source: Reuters (Reporting by Scott DiSavino; Editing by Paul Simao)