U.S. natural gas futures slid about 1% to a six-week low on Monday on forecasts for lower demand over the next two weeks than previously expected and near record output.
Traders also noted prices were down on expectations demand would decline further next month when the Cove Point liquefied natural gas (LNG) plant in Maryland shuts for a couple weeks of maintenance in October.
U.S. gas use has already been reduced for months by the ongoing outage at the Freeport LNG export plant in Texas which has left more gas in the United States for utilities to inject into stockpiles for next winter.
Freeport, the second-biggest U.S. LNG export plant, was consuming about 2 billion cubic feet per day (bcfd) of gas before it shut on June 8. Freeport LNG expects the facility to return to at least partial service in early to mid-November.
In Puerto Rico, meanwhile, Hurricane Fiona left most of the island’s 1.5 million electric customers without power when it hit the island on Sunday.
Front-month gas futures fell 11.6 cents, or 1.5%, to $7.648 per million British thermal units (mmBtu) at 10:04 a.m. EDT (1404 GMT), putting the contract on track for its lowest close since Aug. 8.
With gas prices down for four weeks in a row, gas speculators last week boosted their net short futures and options positions on the New York Mercantile and Intercontinental Exchanges for a third consecutive week to their highest since March 2020, according to the U.S. Commodity Futures Trading Commission’s Commitments of Traders report.
Despite recent declines, gas futures were still up about 105% so far this year as higher prices in Europe and Asia keep demand for U.S. LNG exports strong. Global gas prices have soared due to supply disruptions and sanctions linked to Russia’s Feb. 24 invasion of Ukraine.
Gas was trading around $53 per mmBtu in Europe and $42 in Asia.
Russian gas exports via the three main lines into Germany – Nord Stream 1 (Russia-Germany), Yamal (Russia-Belarus-Poland-Germany) and the Russia-Ukraine-Slovakia-Czech Republic-Germany route – have averaged just 1.3 bcfd so far in September, down from 2.5 bcfd in August and 10.8 bcfd in September 2021.
U.S. gas futures lag far behind global prices because the United States is the world’s top producer with all the fuel it needs for domestic use, while capacity constraints and the Freeport outage prevent the country from exporting more LNG.
Data provider Refinitiv said average gas output in the U.S. Lower 48 states rose to 98.9 bcfd so far in September from a record 98.0 bcfd in August.
With the coming of cooler autumn weather, Refinitiv projected average U.S. gas demand, including exports, would slip from 91.5 bcfd this week to 90.3 bcfd next week. Those forecasts were lower than Refinitiv’s outlook on Friday.
The average amount of gas flowing to U.S. LNG export plants rose to 11.3 bcfd so far in September from 11.0 bcfd in August. That compares with a monthly record of 12.9 bcfd in March. The seven big U.S. export plants can turn about 13.8 bcfd of gas into LNG.
Cove Point LNG in Maryland usually shuts in October for a couple weeks of maintenance.
The reduction in exports from Freeport has been a problem for Europe, where most U.S. LNG has gone this year as countries there wean themselves off Russian energy.
Russia, the world’s second-biggest gas producer, has provided about a third of Europe’s gas in recent years, totaling about 18.3 bcfd in 2021. The European Union wants to cut Russian gas imports by two-thirds by the end of 2022 and refill stockpiles to 80% of capacity by Nov. 1 and 90% by Nov. 1 each year beginning in 2023.
Gas stockpiles in northwest Europe – Belgium, France, Germany and the Netherlands – were currently about 5% above their five-year (2017-2021) average for this time of year, according to Refinitiv. Storage was currently around 86% of capacity.
That is much healthier than U.S. gas inventories, which were still about 11% below their five-year norm.