U.S. natural gas futures held near a one-week low on Thursday as the market waited for direction from a federal report expected to show a smaller-than-usual storage build last week when cold weather kept heating demand for the fuel high.
Prices did not move despite near record output, which should be bearish for prices, and forecasts for higher demand over the next two weeks than previously expected as gas flows to liquefied natural gas (LNG) export plants increase, which should be bullish for prices.
Analysts forecast U.S. utilities added 52 billion cubic feet (bcf) of gas into storage during the week ended April 28. That compared with an increase of 72 bcf in the same week last year and a five-year (2018-2022) average increase of 78 bcf.
If correct, last week’s increase would boost stockpiles to 2.061 trillion cubic feet (tcf), or 19.7% above the five-year average of 1.722 tcf for time of year.
Front-month gas futures for June delivery on the New York Mercantile Exchange remained unchanged at $2.172 per million British thermal units (mmBtu) at 8:44 a.m. EDT (1244 GMT). On Wednesday, the contract closed at its lowest price since April 26.
If the contract declines, it would be the first time it has settled down for four days in a row since late February.
In the spot market, mild weather and weak demand in the U.S. West pressured next-day power and gas prices for Thursday to their lowest levels in years.
Next-day gas at the Southern California Border fell to its lowest price since October 2020, while next-day power fell to its lowest price since June 2021 at the SP-15 hub in Southern California and its lowest price since January 2022 at the Palo Verde hub in Arizona.
Data provider Refinitiv said average gas output in the U.S. Lower 48 states has risen to 101.6 billion cubic feet per day (bcfd) so far in May, up from a record 101.4 bcfd in April.
Meteorologists projected the weather would remain mostly warmer than normal from May 4-14, with cooling degree days (CDD) exceeding heating degree days (HDD) for the first time this year. The weather is expected to turn nearly normal from May 15-19.
HDDs measure the number of degrees a day’s average temperature is below 65 degrees Fahrenheit (18 degrees Celsius) to estimate demand to heat homes and businesses, while CDDs measure the number of degrees a day’s average temperature is above 65 F to estimate demand to cool homes and businesses.
With the weather turning warmer, Refinitiv forecast U.S. gas demand, including exports, would slide from 95.9 bcfd this week to 91.9 bcfd next week. Those forecasts were higher than Refinitiv’s outlook on Wednesday.
Gas flows to the seven big U.S. LNG export plants have slid to an average of 13.4 bcfd so far in May, down from a record 14.0 bcfd in April. The decline was due mostly to reductions at Cameron LNG in Louisiana. The amount of gas flowing to Cheniere Energy Inc’s Sabine Pass in Louisiana, meanwhile, started to increase on Thursday.
Last month’s record flows were higher than the 13.8 bcfd of gas the seven plants can turn into LNG since the facilities also use some of the fuel to power equipment used to produce LNG.