(BOE Report) – U.S. natural gas futures held near a three-month high on Friday as Hurricane Helene battered the U.S. Southeast after causing Gulf of Mexico producers to cut output and millions of power outages in Florida, Georgia and the Carolinas.
On its first day as the front-month, gas futures for November delivery on the New York Mercantile Exchange were unchanged from where they traded on Thursday at $2.753 per million British thermal units (mmBtu) at 8:02 a.m. EDT on Friday, putting the contract on track for its highest close since June 25.
That, however, was up about 7% from where the less expensive October contract closed when it was still the front-month on Thursday.
That expiration-caused price increase pushed the front-month back into technically overbought territory for the third time this week after hitting that level on Monday and Wednesday.
For the week, the contract was up about 13%, putting it on track for a fifth week of gains for the first time since April 2022. During that time, the front-month has gained about 36%.
The U.S. National Hurricane Center (NHC) forecast the remnants of Helene, now a tropical storm, would move from the Georgia-South Carolina border to Tennessee and Kentucky over the weekend.
So far, Helene has caused around four million homes and businesses to lose power in Florida, Georgia, South Carolina, North Carolina and Virginia since it slammed into the Florida Panhandle as a major hurricane on Thursday.
Although storms are more likely to reduce gas prices and demand through power outages and shutting of liquefied natural gas (LNG) export plants, analysts said this storm was on track to miss the LNG plants.
That means demand for gas from those LNG export plants should remain high at the same time that some Gulf Coast producers have cut output. The U.S. Bureau of Safety and Environmental Enforcement said producers shut about 20%, or 0.4 billion cubic feet per day (bcfd), of gas production in the U.S. Gulf of Mexico for Helene.
More than 75% of U.S. gas production still comes from big inland shale basins like Appalachia in Pennsylvania, West Virginia and Ohio and the Permian in West Texas and eastern New Mexico, so most of the country’s gas output should remain safe from the storm.
SUPPLY AND DEMAND
LSEG said gas output in the Lower 48 U.S. states has fallen to an average of 101.9 bcfd so far in September, down from 103.2 bcfd in August. That compares with a record 105.5 bcfd in December 2023.
LSEG forecast average gas demand in the Lower 48 states, including exports, will drop from 99.6 bcfd this week to 98.4 bcfd next week and 98.1 bcfd in two weeks. Those forecasts were similar to LSEG’s outlook on Thursday.
Gas flows to the seven big U.S. LNG export plants have eased to an average of 12.8 bcfd so far in September, down from 12.9 bcfd in August. That compares with a monthly record high of 14.7 bcfd in December 2023.
That reduction was due mostly to the planned Sept. 20 shutdown of Berkshire Hathaway Energy’s 0.8-bcfd Cove Point LNG export plant in Maryland for around three weeks of annual maintenance.
(Reporting by Scott DiSavino)
