U.S. natural gas futures fell about 2% on Wednesday as Canada boosted exports after reducing flows earlier in the week due to wildfires in Alberta and spot gas prices at the Waha hub in West Texas fell to negative levels for the first time in years.
Spot gas prices for Wednesday at the Waha hub in the Permian Shale closed in negative territory for the first time since October 2020 as pipeline maintenance prevented some gas from leaving the basin and mild spring weather reduced demand for the fuel.
Gas futures fell despite a decline in U.S. output in recent days and forecasts for higher gas demand over the next two weeks than previously expected.
Front-month gas futures for June delivery on the New York Mercantile Exchange fell 4 cents, or 1.8%, to $2.227 per million British thermal units (mmBtu) at 9:14 a.m. EDT (1314 GMT). On Tuesday, the contract settled at its highest level since May 1 for a second day in a row.
Data provider Refinitiv said average gas output in the U.S. Lower 48 states held at 101.4 billion cubic feet per day (bcfd) so far in May, matching the monthly record hit in April.
On a daily basis, however, output was on track to drop by 1.3 bcfd over the past couple of days to a preliminary two-week low of 100.4 bcfd on Wednesday.
The amount of gas flowing from Canada to the U.S. was on track to reach 8.0 bcfd on Wednesday after dropping to a 25-month low of 6.7 bcfd on Sunday as wildfires in Alberta caused some producers to shut oil and gas output and pipeline flows. Since the start of the year, Canada exported an average of 8.5 bcfd of gas to the U.S.
Meteorologists projected the weather would remain mostly warmer than normal through May 23 with fewer Total Degree Days (TDD) than usual for this time of year.
TDDs measure the number of degrees a day’s average temperature is above or below 65 degrees Fahrenheit (18 degrees Celsius) to estimate demand to cool or heat homes and businesses.
With warmer weather coming, Refinitiv forecast U.S. gas demand, including exports, would rise from 90.7 bcfd this week to 91.2 bcfd next week as some homes and businesses start to turn on their air conditioners. Those forecasts were higher than Refinitiv’s outlook on Tuesday.
Gas flows to the seven big U.S. LNG export plants fell to an average of 13.1 bcfd so far in May, down from a record 14.0 bcfd in April. The decline was due mostly to reductions at Cameron LNG’s terminal in Louisiana and Cheniere Energy Inc’s facilities at Sabine Pass in Louisiana and Corpus Christi in Texas.
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.
GLOBAL GAS PRICE COLLAPSE
Some analysts have questioned whether this year’s gas price collapse in Europe and Asia could force U.S. exporters to cancel LNG cargoes this summer after mostly mild weather over the winter left massive amounts of gas in storage. In 2020, at least 175 LNG shipments were canceled due to oversupply and weak demand.
But for now, most analysts say energy security concerns following Russia’s invasion of Ukraine in February 2022 should keep global gas prices high enough to sustain record U.S. LNG exports in 2023.
Gas was trading at 22-month lows of around $11 per mmBtu at the Dutch Title Transfer Facility (TTF) benchmark in Europe and the Japan Korea Marker (JKM) in Asia.