U.S. natural gas futures slid about 2% to a fresh seven-month low on Monday on record output and forecasts for mild weather to remain through at least early November.
In a move that could help cut U.S. consumer heating costs this winter, gas futures have dropped about 60% over the past nine weeks as that record output, mild weather and low liquefied natural gas (LNG) exports have left more gas in the United States for utilities to inject into storage. EIA/GASNGAS/POLL
Major LNG outages include Berkshire Hathaway Energy’s shutdown on Oct. 1 of its 0.8 billion-cubic-feet-per-day (bcfd) Cove Point LNG export plant in Maryland for about three weeks of planned maintenance and the shutdown of Freeport LNG’s 2.0-bcfd plant in Texas for unplanned work after an explosion on June 8. Freeport expects the facility to return to at least partial service in early to mid-November.
At least four vessels were heading to Freeport, according to Refinitiv data, including Prism Brilliance (currently located off the coast from the plant), Prism Diversity (expected to arrive Oct. 29), Prism Courage (Nov. 1) and Seapeak Methane (Nov. 22). Some traders expect Freeport will return to service in November while others believe the return will be delayed. Officials at Freeport have said the plant remains on track to return in November.
Front-month gas futures NGc1 fell 7.7 cents, or 1.6%, to $4.882 per million British thermal units (mmBtu) by 8:51 a.m. EDT (1251 GMT), putting the contract on track for its lowest close since March 18.
That also put the front-month down for a seventh day in a row for the first time since February 2021 and kept it in technically oversold territory with a relative strength index (RSI) below 30 for a sixth day for the first time since January 2020.
With gas prices already down for nine weeks in a row, speculators last week boosted their net short futures and options positions on the New York Mercantile and Intercontinental Exchanges for the seventh time in eight weeks to their highest since March 2020, according to the U.S. Commodity Futures Trading Commission’s Commitments of Traders report.
Despite weeks of losses, U.S. gas futures were still up about 31% so far this year as soaring global gas prices feed demand for U.S. exports due to supply disruptions and sanctions linked to Russia’s Feb. 24 invasion of Ukraine.
Gas was trading at $28 per mmBtu in Europe TRNLTTFMc1 and $32 in Asia JKMc1.
That put European forwards down about 17% for the day and on track to for their lowest close since June 13 as strong LNG imports boosted the amount of gas in storage in Northwest Europe to healthy levels over 90% of capacity. The contract settled at a record high of $90.91 on Aug. 25. NG/EU
During the first nine months of 2022, roughly 60%, or 6.3 bcfd, of U.S. LNG exports went to Europe, as shippers diverted cargoes from Asia to fetch higher prices. Last year, just 29%, or about 2.8 bcfd, of U.S. LNG exports went to Europe.
Data provider Refinitiv said average gas output in the U.S. Lower 48 states rose to 99.5 bcfd so far in October, up from a monthly record of 99.4 bcfd in September.
With the coming of seasonally cooler weather, Refinitiv projected average U.S. gas demand, including exports, would rise from 93.9 bcfd this week to 97.1 bcfd next week. The forecast for this week was lower than Refinitiv’s outlook on Friday.
