U.S. natural gas futures fell about 2% on Thursday to a fresh two-week low, on a bigger-than-expected storage build,record output and forecasts for mild weather and less heating demand than expected throughearly November.
Traders noted prices were down even though the amount of gas flowing to liquefied natural gas (LNG) export plants was near record highs.
The U.S. Energy Information Administration (EIA) saidutilities added 97billion cubic feet (bcf) of gas into storage during the week ended Oct. 13.
That was much bigger than the 80-bcf build analysts forecast in a Reuters poll and compareswith an increase of 113 bcf in the same week last year and a five-year (2018-2022) average increase of 85 bcf.
Analysts said last week’s build was likely bigger than expected due to record output and milder-than-normal weather that kept heating and cooling demand low.
Front-month gas futures NGc1 for November delivery on the New York Mercantile Exchange fell 7.3 cents, or 2.4%, to $2.983 per million British thermal units (mmBtu) at 10:49 a.m. EDT (1449 GMT),putting the contract on track for its lowest close since Oct. 4 for a fourth day in a row.
That also put the contract below the $3 per mmBtu support level and down for a seventh straight day for the first time since February 2021.
Analysts at energy advisory EBW Analytics said some marketers may be locking in arbitrage profits by buying gas on the spot market, storing it, and selling a futures contract, which “appear(s) ripe for the taking, at least on paper.”
Spot prices at the Henry Hub benchmark NG-W-HH-SNL in Louisiana were trading around $2.92 for Thursday. Spot prices have weighed on futures prices for months with next-day prices closing below the futures front-month for 165 out of 200 trading days so far this year, according to data from financial firm LSEG.
SUPPLY AND DEMAND
LSEG said average gas output in the Lower 48 U.S. states rose to an average of 103.6 billion cubic feet per day (bcfd) so far in October, up from 102.6 bcfd in September and a record high of 103.1 bcfd in July.
With milder weather coming, LSEG forecast U.S. gas demand, including exports, would ease from 97.6 bcfd this week to 96.9 bcfd next week. Those forecasts were lower than LSEG’s outlook on Wednesday.
Pipeline exports to Mexico slid to an average of 6.9 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.
Gas flows to the seven big U.S. LNG export plants rose to 13.5 bcfd so far in October with the return of Berkshire Hathaway Energy’s Cove Point export plant in Maryland, 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 $15 per mmBtu at both the Dutch Title Transfer Facility (TTF) benchmark in Europe and $18 at the Japan Korea Marker (JKM) in Asia.
Source: Reuters (Reporting by Scott DiSavino; editing by Jonathan Oatis and David Gregorio)