U.S. natural gas futures slid about 2% to a fresh three-month low as record output and reduced liquefied natural gas (LNG) exports allow utilities to keep injecting much more gas into storage than usual.
That price decline, which is part of an eight-week trend, occurred despite forecasts for colder weather and higher heating demand next week than previously expected.
Major LNG outages include Berkshire Hathaway Energy’s shutdown on Oct. 1 of its 0.8 billion-cubic-feet-per-day (bcfd) Cove Point LNG export plant in Maryland for about three weeks of planned maintenance and the 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 (currently located off the coast from the plant), Prism Diversity (expected to arrive Oct. 27) and Seapeak Methane (Nov. 22). Some traders now believe Freeport will return in November while others believe the return will be delayed. Officials at Freeport said they remain on track to return the plant in November.
Front-month gas futures were down 13.9 cents, or 2.4%, to $5.606 per million British thermal units (mmBtu) at 8:49 a.m. EDT (1249 GMT), putting the contract on track for its lowest close since July 6 for a third day in a row.
That put the front-month on track to decline for a fourth day in a row for the first time since September and kept it in technically oversold territory with a relative strength index (RSI) below 30 for a third straight day.
Despite recent declines, U.S. gas futures remain up about 51% 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 $33 per mmBtu in Europe and $30 in Asia.
European forwards were up about 4% so far on Wednesday after collapsing about 30% to a four-month low over the past week 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 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 rose 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 100.7 bcfd this week to 96.7 bcfd next week. The forecast for next week was higher than Refinitiv’s outlook on Tuesday.
The average amount of gas flowing to U.S. LNG export plants has fallen to 11.1 bcfd so far in October from 11.5 bcfd in September and well below the 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.
U.S. LNG exports, however, could start to rise this week if Cove Point returns to service as some traders expect.