U.S. natural gas futures fell about 5% to a three-month low on Wednesday as record output and reduced liquefied natural gas (LNG) exports allowed utilities to keep injecting more gas into storage than usual for weeks.
That price decline, which is part of an eight-week trend and put the contract down about 16% so far this week, occurred despite forecasts for colder weather and higher heating demand next week than previously expected.
“The gas futures market still has room to fall… as the outlook for the coming weeks and months ahead is downright bearish,” analysts at energy consulting firm Gelber & Associates said in a report, noting several weather forecasts were calling for a mild winter.
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.
Analysts noted that even after Cove Point and Freeport return to service, U.S. LNG exports may be slow to increase due to a lack of available LNG vessels because so many ships were waiting to get into European ports to drop off their cargoes.
The ships are waiting because European gas storage is near full and energy firms need to figure out where to put all the gas that is coming to the continent.
Front-month gas futures fell 28.3 cents, or 4.9%, to settle at $5.462 per million British thermal units (mmBtu), their lowest close since June 30.
That put the front-month down 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 were still up about 46% 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 $30 in Asia.
That put European forwards up about 8% 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 over 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.
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.