U.S. natural gas futures dropped about 4% on Monday to the lowest in nearly 12 weeks on record output and forecasts for milder weather and slower demand over the next two weeks due to ongoing storm-related outages and a reduction in liquefied natural gas (LNG) exports.
Reducing gas demand from electric utilities, about 560,000 homes and businesses in Florida remained without power after Hurricane Ian hit the state on Sept. 28-29.
Over the weekend in Maryland, Berkshire Hathaway Energy’s 0.8-billion cubic feet per day (bcfd) Cove Point LNG export plant shut for about three weeks of planned annual maintenance. Gas demand already had taken a hit from the outage at the Freeport LNG export plant in Texas, the second-biggest U.S. LNG export plant which 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.
Front-month gas futures for November delivery fell 29.6 cents, or 4.4%, to settle at $6.470 per million British thermal units (mmBtu), their lowest close since July 12.
That kept the front-month in technically oversold territory with a relative strength index (RSI) below 30 for a second day. The contract closed below the 200-day moving average for the first time since early July.
The premium of futures for December 2022 over November 2022 doubled over the past week to 33 cents per mmBtu, its highest since October 2010.
U.S. futures were still up about 75% so far this year as soaring global gas prices have fed demand for U.S. exports due to supply disruptions and sanctions linked to Russia’s Feb. 24 invasion of Ukraine.
Gas was trading around $49 per mmBtu in Europe and $39 in Asia. That was an 8% decline for prices in Europe.
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 October, the same as September but well below 9.2 bcfd in October 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 100.5 bcfd so far in October from a monthly record of 99.4 bcfd in September.
With cooler autumn-like weather coming, Refinitiv projected average U.S. gas demand, including exports, would slip from 88.4 bcfd this week to 90.2 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 fell to 11.2 bcfd so far in October from 11.5 bcfd in September. 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.