U.S. natural gas futures fell about 4% 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 southwest Florida on Wednesday as a major storm with winds of up to 125 miles (201 kilometers) per hour.
Only about 2% of U.S. gas production comes from the federal offshore Gulf of Mexico, with most coming from shale basins like the Permian in West Texas and the Marcellus in Pennsylvania. Analysts said storms were more likely to cut demand than supply since they knock out power and can cause liquefied natural, gas (LNG) export terminals to shut.
There were still about 487,800 customers in Puerto Rico and 127,000 in Nova Scotia without power after Hurricane Fiona battered the U.S. island on Sept. 18 and the Canadian province on Sept. 24.
Also weighing on gas prices, demand was expected to 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, leaving more gas for U.S. 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 25.2 cents, or 3.7%, to settle at $6.651 per million British thermal units (mmBtu), their lowest close since July 14.
The front-month remained technically oversold, with a relative strength index (RSI) below 30 for a fourth straight day for the first time since early July.
Year-to-date, gas futures remained up about 79% as global gas prices have soared, feeding demand for U.S. exports due to supply disruptions and sanctions linked to Russia’s Feb. 24 invasion of Ukraine.
Gas was trading around $54 per mmBtu in Europe and $42 in Asia. That was an 11% 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.