U.S. natural gas futures dropped more than 3% to their lowest since March on Thursday, as investors awaited a federal report that is expected to show a larger-than-usual storage build in the face of moderating weather that will likely reduce fuel usage.
Front-month gas futures were down 12.2 cents, or 2.2%, to $5.34 per million British thermal units (mmBtu) at 9:24 a.m. EDT (1324 GMT), after sliding to $5.253 per mmBtu earlier in the session.
Analysts forecast that U.S. utilities likely added 105 billion cubic feet (bcf) of natural gas to storage in the week to Oct. 14 as record output and an increase in wind power boosted the amount of fuel available, according to a Reuters poll on Wednesday.
That compares with a build of 91 bcf during the same week a year ago and a five-year (2017-2021) average increase of 73 bcf.
The U.S. Energy Information Administration (EIA) will release its weekly storage report at 10:30 a.m. EDT (1430 GMT).
“The market is prepared for another big injection. We’ve seen a string of pretty sizable injections for the last couple of weeks and the market is nervous about short term demand prospects…the fundamentals are very weak and that’s been pressuring prices,” said Phil Flynn, analyst at Price Futures Group.
“Having said that, the market is getting extremely over-sold and even though we’ve seen some sizable injections, supplies are still too low going into winter and if the weather changes, if we get some cold weather as some people are predicting in November or December, the market could change,” Flynn added.
Despite recent declines, U.S. gas futures remain up about 42% 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.
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 99.5 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 100.6 bcfd this week to 95.5 bcfd next week.