U.S. natural gas futures slid about 2% on Tuesday to a 10-week low as Hurricane Ian advanced toward Florida and on forecasts for milder weather over the next two weeks that will likely cut gas demand and allow utilities to inject more fuel into storage.
The U.S. National Hurricane Center (NHC) projected Ian, after battering Cuba, would cross the Gulf of Mexico and slam into southwest Florida on Wednesday as a major storm with winds of up to 120 miles (193 kilometers) per hour.
With most of the nation’s gas production located away from the Gulf of Mexico in shale basins like the Permian in West Texas, analysts said tropical storms were more demand-destroying events, since they knock out power and can cause liquefied natural gas (LNG) export terminals to shut.
Only about 2% of U.S. gas production comes from the federal offshore Gulf of Mexico.
In other hurricane news, there were still about 503,000 customers in Puerto Rico and 139,000 in Nova Scotia without power after Hurricane Fiona battered the U.S. island on Sept. 18 and the Canadian province on Sept. 24.
Another factor weighing on gas prices was the expectation that demand would decline in October when the Cove Point LNG plant in Maryland shuts for a couple weeks of maintenance. Cove Point consumes about 0.8 billion cubic feet per day (bcfd) of gas.
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 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.
On its second to last day as the front-month, gas futures for October delivery fell 14.3 cents, or 2.1%, to $6.760 per million British thermal units (mmBtu) at 9:26 a.m. EDT (1326 GMT), putting the contract on track for its lowest close since July 14.
That kept the front-month in technically oversold territory, with a relative strength index (RSI) below 30 for a fourth day in a row for the first time since early July.
Despite recent declines, gas futures were still up about 85% 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 $38 in Asia. That was an 8% gain for prices in Europe due to leaks on the Nord Stream pipelines from Russia to Germany.
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.
Data provider Refinitiv said average gas output in the U.S. Lower 48 states has risen to 98.8 bcfd so far in September from a monthly record of 98.0 bcfd in August.
With cooler autumn weather coming, Refinitiv projected average U.S. gas demand, including exports, would slip from 90.3 bcfd this week to 88.3 bcfd next week. The forecast for next week was lower than Refinitiv’s outlook on Monday.