U.S. natural gas futures edged up about 1% on Wednesday on a drop in daily output so far this month due to pipeline issues and the evacuation of some oil and gas platforms in the Gulf of Mexico ahead of Hurricane Rafael, and on forecasts for slightly cooler weather and higher heating demand next week than previously expected.
Front-month gas futures NGc1 for December delivery on the New York Mercantile Exchange (NYMEX) rose 3.5 cents, or 1.3%, to $2.705 per million British thermal units (mmBtu) at 8:41 a.m. EDT (1341 GMT).
Open interest in NYMEX futures, meanwhile, rose to a record high for a fourth day in a row, reaching 1.778 million contracts on Nov. 4.
In other news, Donald Trump was elected U.S. president, capping a remarkable comeback four years after he was voted out of the White House.
The U.S. National Hurricane Center forecast Rafael would slam into Cuba later Wednesday as it moves from the Caribbean Sea into the Gulf of Mexico. By Sunday, Rafael is expected to weaken back into a tropical storm before making landfall in the U.S. Gulf Coast near Louisiana or Texas next week.
Hurricanes can boost gas prices by cutting output, although only about 2% of the nation’s gas comes from the federal offshore Gulf of Mexico area. But hurricanes can also reduce prices by destroying demand for gas through power outages and knocking liquefied natural gas (LNG) export plants out of service. Some storms do both.
In the spot market, pipeline constraints caused next-day gas prices at the Waha hub NG-WAH-WTX-SNL in the Permian Shale in West Texas to remain in negative territory for a fifth day in a row and a record 45th time this year.
Analysts said recent constraints were caused by maintenance on Kinder Morgan’s KMI.N Permian Highway gas pipe in Texas that was expected to continue through mid-November.
SUPPLY AND DEMAND
Financial firm LSEG said average gas output in the Lower 48 U.S. states slid to 100.7 billion cubic feet per day (bcfd) so far in November, down from 101.3 bcfd in October. That compared with a record 105.3 bcfd in December 2023.
On a daily basis, output over the past four days was on track to drop by around 2.7 bcfd to a preliminary nine-month low of 98.9 bcfd on Wednesday. Analysts noted that preliminary data is often revised later in the day.
In addition to curtailments for Rafael in the Gulf of Mexico and the Permian Highway maintenance, the daily output decline was also related to a few force majeures and reductions on Kinder Morgan’s El Paso pipe in New Mexico over the past couple of days.
LSEG forecast average gas demand in the Lower 48, including exports, would rise from 100.9 bcfd this week to 102.4 bcfd next week.
The amount of gas flowing to the seven big U.S. LNG export plants fell to an average of 12.3 bcfd so far in November, down from 13.1 bcfd in October. That compares with a monthly record high of 14.7 bcfd in December 2023.
The feedgas decline so far this month was mostly due to the shutdown of Freeport LNG’s 2.1-bcfd plant in Texas on Nov. 1 amid a power feed interruption at the pre-treatment facility. Freeport, however, was back on line by Nov. 3 and was on track to pull in 2.4 bcfd on Wednesday, which would top the current all-time high of 2.3 bcfd on Tuesday, according to LSEG data.
Source: Reuters (Reporting by Scott DiSavino, Editing by Bernadette Baum)