U.S. natural gas futures eased on Friday on near record output and expectations U.S. utilities will keep stockpiling gas for a couple more weeks.
That small price decline came despite forecasts for seasonally colder weather expected to boost heating demand in mid November.
In October, global gas prices soared to record highs as utilities around the world scrambled for liquefied natural gas (LNG) cargoes to refill low stockpiles in Europe and meet rising demand in Asia, where energy shortfalls have caused power blackouts in China. Analysts have said European inventories were about 15% below normal for this time of year versus just 3% below normal in the United States.
U.S. futures also climbed in October, reaching a 12-year high early in the month, on expectations LNG demand will remain strong for many months.
Price gains in the United States, however, were restrained compared with overseas markets because the United States has more than enough gas in storage for winter and ample production to meet domestic and export demand. Despite recent pullbacks, gas prices in Europe and Asia were still trading about five times higher than in the United States.
Front-month gas futures fell 5 cents, or 0.9%, to $5.666 per million British thermal units (mmBtu) at 7:47 a.m. EDT (1147 GMT).
That put the front-month up about 5% this week after gaining about 3% last week.
Data provider Refinitiv said output in the U.S. Lower 48 states averaged 95.3 billion cubic feet per day (bcfd) so far in November, up from 94.1 bcfd in October.
On a daily basis, output reached 96.4 bcfd on Thursday, its highest since hitting a record high of 96.6 bcfd in November 2019.
Refinitiv projected average U.S. gas demand, including exports, would drop from 98.5 bcfd this week to 95.8 bcfd next week as the weather turns milder before jumping to 104.9 bcfd in two weeks when the weather turns seasonally cold. The forecasts for this week and next week were higher than Refinitiv projected on Thursday.
The amount of gas flowing to U.S. LNG export plants averaged 10.7 bcfd so far in November, up from 10.5 bcfd in October. That compares with a monthly record of 11.5 bcfd in April.
With gas prices near $25 per mmBtu in Europe and $32 in Asia, versus around $6 in the United States, traders said buyers around the world will keep purchasing all the LNG the United States can produce.
But no matter how high global gas prices rise, the United States only has the capacity to turn about 10.5 bcfd of gas into LNG. The rest of the gas flowing to the export plants is used to fuel equipment that produces the LNG.
Global markets will have to wait until later this year to get more, when the sixth liquefaction train at Cheniere Energy Inc’s Sabine Pass and Venture Global LNG’s Calcasieu Pass in Louisiana start producing LNG in test mode.