U.S. natural gas futures held near a three-month low as forecasts for milder weather through the end of October offset forecasts for higher demand than previously expected.
Gas futures have been declining for eight weeks on record output and reduced liquefied natural gas (LNG) exports that have allowed utilities to inject much bigger than normal amounts of gas into storage over the past month.
Major LNG outages include Berkshire Hathaway Energy’s shutdown of its 0.8-billion-cubic-feet-per-day (bcfd) Cove Point LNG export plant in Maryland for about three weeks of planned maintenance on Oct. 1 and the continuing shutdown of Freeport LNG’s 2.0-bcfd plant in Texas for unplanned work after an explosion on June 8. Freeport expects the facility to return to at least partial service in early to mid-November.
At least three vessels were heading to Freeport, according to Refinitiv data, including Prism Brilliance (expected to arrive Oct. 18), Prism Diversity (Oct. 27) and Seapeak Methane (Nov. 22), prompting some traders to believe Freeport will return in November. Others in the market, however, believe the plant’s return will be delayed. Officials at Freeport said they remain on track to return the plant in November.
U.S. LNG exports could start to rise later this week if Cove Point returns to service as some traders expect.
Front-month gas futures remained unchanged at $5.999 per million British thermal units (mmBtu) at 7:59 a.m. EDT (1159 GMT), the same as on Monday when the contract closed at its lowest price since July 6.
Despite recent declines, U.S. futures are still up about 61% so far this year as soaring global gas prices feed demand for U.S. exports due to supply disruptions and sanctions linked to Russia’s Feb. 24 invasion of Ukraine.
Gas was trading at $34 per mmBtu in Europe and $31 in Asia.
That puts European forwards down about 8% for the day and on track for their lowest close since June 14 as strong LNG imports boosted the amount of gas in storage in Northwest Europe to healthy levels above 90% of capacity. European prices hit an all-time high of $90.91 on Aug. 25.
During the first nine months of 2022, roughly 60%, or 6.3 billion cubic feet per day (bcfd), of U.S. LNG exports went to Europe, as shippers diverted cargoes from Asia to fetch higher prices. Last year, just 29%, or about 2.8 bcfd, of U.S. LNG exports went to Europe.
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 has risen to 99.6 bcfd so far in October, up from a monthly record of 99.4 bcfd in September.
With milder weather coming, Refinitiv projected average U.S. gas demand, including exports, would fall from 101.0 bcfd this week to 95.9 bcfd next week. Those forecasts were higher than Refinitiv’s outlook on Monday.
The average amount of gas flowing to U.S. LNG export plants has fallen to 11.0 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.