U.S. natural gas futures eased about 1% to a two-week low on Friday on a lower drop in output than previously expected, declines in gas flows to liquefied natural gas (LNG) export plants and forecasts for less demand.
Those extra supplies should allow utilities to keep injecting more gas into storage than usual for this time of year.
Gas futures for June delivery on the New York Mercantile Exchange fell 1.8 cents, or 0.6%, to $3.344 per million British thermal units at 8:39 a.m. EDT (1239 GMT), putting the contract on track for its lowest close since April 30 for a second day in a row.
For the week, the front-month was down about 11% after soaring about 29% over the prior two weeks.
Despite a heat wave in Texas this week, analysts said heating and cooling demand should remain low across much of the rest of the country in coming weeks, allowing utilities to keep adding more gas into storage than normal for this time of year.
Gas stockpiles were around 3% above the five-year (2020-2024) normal.
SUPPLY AND DEMAND
Financial firm LSEG said average gas output in the Lower 48 U.S. states fell 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, output was on track to drop to a preliminary one-week low of 103.1 bcfd on Friday. But that decline was smaller than previously expected. Analysts have noted that preliminary data is often revised later in the day.
Part of the reason for output reductions was spring maintenance on several gas pipes, including U.S. energy firm Kinder Morgan’s 2.7-bcfd Permian Highway from the Permian basin in West Texas to the Texas Gulf Coast.
Kinder Morgan said it will perform a turbine exchange at the Big Lake compressor station from May 13-26 that will reduce mainline capacity to around 2.2 bcfd.
Traders have noted the Permian Highway reduction trapped some gas in the Permian basin, helping spot gas prices at the Waha Hub (NG-WAH-WTX-SNL) in West Texas to drop to around 94 cents per mmBtu on Friday, down from $1.58 For Thursday and an average of $1.87 over the prior seven days.
LSEG forecast average gas demand in the Lower 48, including exports, will hold around 96.3 bcfd this week and next before easing to 94.0 bcfd in two weeks.
The average amount of gas flowing to the eight big LNG export plants operating in the U.S. fell 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 brief reductions at Freeport LNG’s 2.1-bcfd plant in Texas.
LSEG said gas flows to Corpus were on track to hold near a two-month low of 1.5 bcfd for a third day in a row on Friday, down from 1.6 bcfd on Tuesday and an average of 2.0 bcfd during the prior seven days, while feedgas to Freeport was on track to rise to a four-month high of 2.2 bcfd on Friday, up from 1.5 bcfd on Thursday and an average of 2.0 bcfd over the prior seven days.
Source: Reuters