U.S. natural gas futures fell about 2% to a six-week low on Thursday on record output and forecasts for milder weather through early October that should allow utilities to inject more gas than usual into storage over the next few weeks.
That price decline came ahead of a federal report expected to show last week’s storage build was bigger than usual as mild weather and an increase in wind power kept the amount of gas power generators burned low.
Analysts forecast U.S. utilities added 93 billion cubic feet (bcf) of gas to storage during the week ended Sept. 16. That compares with an increase of 77 bcf in the same week last year and a five-year (2017-2021) average increase of 81 bcf.
If correct, last week’s increase would boost stockpiles to 2.864 trillion cubic feet (tcf), or 10.7% below the five-year average of 3.206 tcf for this time of the year.
Gas prices were also weighed down by expectations demand for the fuel would decline in October when the Cove Point liquefied natural gas (LNG) plant in Maryland shuts for a couple weeks of maintenance.
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, an estimated 1 million homes and businesses remain without power after Hurricane Fiona hit on Sunday. The U.S. National Hurricane Center warned that a tropical cyclone would likely form in the Caribbean Sea over the next five days.
Front-month gas futures fell 13.8 cents, or 1.8%, to $7.641 per million British thermal units (mmBtu) at 8:25 a.m. EDT (1225 GMT), putting the contract on track for its lowest close since Aug. 8.
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 $55 per mmBtu in Europe and $39 in Asia. That was a 4% increase in European prices.
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 98.8 bcfd so far in September from a record 98.0 bcfd in August.
With cooler autumn weather coming, Refinitiv projected average U.S. gas demand, including exports, would slip from 92.6 bcfd this week to 90.7 bcfd next week. Those forecasts were higher than Refinitiv’s outlook on Wednesday.
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.