U.S. natural gas futures slid about 3% on Thursday on rising output as warmer weather in North Dakota unfroze wells and forecasts pointed to milder weather and lower demand next week than previously expected.
That U.S. price decline also came as gas futures in Europe dropped about 5%, reversing some of their gains from earlier in the week after Russia stopped selling gas to Poland and Bulgaria, and after a U.S. report showing an expected smaller than usual storage build last week.
The U.S. Energy Information Administration (EIA) said utilities added 40 billion cubic feet (bcf) of gas to storage during the week ended April 22.
That was close to the 38-bcf build analysts forecast in a Reuters poll and compares with an increase of 18 bcf in the same week last year and a five-year (2017-2021) average increase of 53 bcf.
Last week’s increase boosted stockpiles to 1.490 trillion cubic feet (tcf), or 17.0% below the five-year average of 1.795 tcf for this time of the year.
On its first day as the U.S. front-month, gas futures for June delivery fell 21.5 cents, or 3.9%, to $7.124 per million British thermal units (mmBtu) at 10:39 a.m. EDT (1439 GMT). On Wednesday, when May was still the front-month, the contract settled at its highest since closing at a 13-year high of $7.82 on April 18.
U.S. gas futures have gained about 90% so far this year as higher global prices kept demand for U.S. liquefied natural gas (LNG) exports near record highs since Russia invaded Ukraine on Feb. 24. Gas was trading around $31 per mmBtu in Europe and $25 in Asia.
The U.S. gas market, however, remains mostly shielded from those much higher global prices because the United States is the world’s top gas producer, with all the fuel it needs for domestic use while capacity constraints inhibit exports of more LNG no matter how high global prices rise.
Data provider Refinitiv said average gas output in the U.S. Lower 48 states rose to 94.2 billion cubic feet per day (bcfd) so far in April from 93.7 bcfd in March. That compares with a monthly record of 96.3 bcfd in December 2021.
On a daily basis, output was on track to gain about 0.1 bcfd on Thursday after dropping about 3.6 bcfd over the prior four days to an 11-week low of 91.8 bcfd on Wednesday, as a late season cold snap caused wells to freeze in North Dakota and the Rocky Mountains.
Refinitiv projected average U.S. gas demand, including exports, would slide from 93.6 bcfd this week to 90.5 bcfd next week due to a seasonal warming of the weather. The forecast for next week was lower than Refinitiv’s outlook on Wednesday.
The amount of gas flowing to U.S. LNG export plants slid to 12.3 bcfd so far in April due to maintenance at Gulf Coast plants, down from a record 12.9 bcfd in March. The United States can turn about 13.2 bcfd of gas into LNG.
Since the United States will not be able to produce much more LNG anytime soon, the country has worked with allies to divert LNG exports from elsewhere to Europe to help European Union countries and others break their dependence on Russian gas.
Russia, the world’s second biggest gas producer, has provided about 30%-40% of Europe’s gas, totaling about 18.3 bcfd in 2021.