U.S. natural gas futures edged up about 1% on Thursday ahead of a weekly storage report due to a drop in output over the past few days and forecasts for higher demand over the next two weeks than previously expected.
That small price increase came despite forecasts for less cold weather through mid December than previously expected and even though production was still on track to hit a monthly record in November that should reduce the amount of gas utilities need to pull from storage to meet rising heating demand.
Analysts forecast U.S. utilities pulled just 12 billion cubic feet (bcf) of gas out of storage during the week ended Nov. 24 when warmer than usual weather kept heating demand low.
That compares with a withdrawal of 80 bcf in the same week last year and a five-year (2018-2022) average decline of 44 bcf.
If correct, last week’s increase would cut stockpiles to 3.814 trillion cubic feet (tcf), or 8.0% above the five-year average of 3.533 tcf for the time of year.
Front-month gas futures NGc1 for January delivery on the New York Mercantile Exchange rose 2.8 cents, or 1.0%, to $2.832 per million British thermal units (mmBtu) at 9:44 a.m. EST (1444 GMT).
For the month, the contract fell about 21% in November after rising about 22% in October. That would be the biggest monthly percentage drop since January when it plunged by 40%.
With production at record highs and ample amounts of gas in storage, the futures market has been sending signals that some traders have given up hope of seeing winter price spikes from November through March.
Many in the market think futures have already peaked this winter in November.
SUPPLY AND DEMAND
LSEG said average gas output in the Lower 48 U.S. states rose to 107.7 billion cubic feet per day (bcfd) so far in November, up from a record 104.2 bcfd in October.
On a daily basis, however, output was on track to drop by 3.1 bcfd over the past three days to a preliminary three-week low of 106.3 bcfd on Thursday after hitting a record 109.4 bcfd on Monday. Traders have noted that preliminary data is often revised later in the day.
Meteorologists projected the weather would remain warmer than normal through at least Dec. 14.
With less cold coming, LSEG forecast U.S. gas demand in the Lower 48 states, including exports, would drop from 129.3 bcfd this week to 119.6 bcfd next week. Those forecasts were higher than LSEG’s outlook on Wednesday.
Gas flows to the seven big U.S. LNG export plants rose to an average of 14.3 bcfd so far in November, up from 13.7 bcfd in October and a monthly record of 14.0 bcfd in April.
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 $13 per mmBtu at the Dutch Title Transfer Facility (TTF) benchmark in Europe TRNLTTFMc1 and $16 at the Japan Korea Marker (JKM) in Asia
Source: Reuters (Reporting by Scott DiSavino, Editing by Marguerita Choy)