U.S. natural gas prices eased about 1% to a one-week low on Monday on forecasts for less demand than previously expected over the next two weeks, cutting futures volatility to a 13-month low.
That price decline came despite a drop in gas exports from Canada due to wildfires and as the amount of gas flowing to U.S. liquefied natural gas (LNG) export plants remained low due to maintenance work.
Front-month gas futures for July delivery on the New York Mercantile Exchange fell 2.1 cents, or 0.9%, to $2.233 per million British thermal units (mmBtu) at 9:11 a.m. EDT (1311 GMT), putting the contract on track for its lowest close since June 2.
Even though gas prices rose about 4% last week, speculators switched their futures and options positions on the New York Mercantile and Intercontinental Exchanges to net short from net long for the first time in four weeks, according to the U.S. Commodity Futures Trading Commission’s Commitments of Traders report.
Mild weather so far this year has kept heating and cooling demand low, cutting historic or actual 30-day close-to-close volatility to 61.9%, its lowest since April 2022.
On a daily basis, historic volatility hit a record high of 177.7% in February 2022 and a record low of 7.3% in June 1991.
So far this year, historic volatility has averaged 89.1%. That compares with an annual record high of 92.8% in 2022 and a five-year (2018-2022) average of 57.9%.
SUPPLY AND DEMAND
Data provider Refinitiv said average gas output in the U.S. Lower 48 states eased to 102.3 billion cubic feet per day (bcfd) so far in June, down from a monthly record of 102.5 bcfd in May.
The amount of gas flowing from Canada to the United States was on track to rise to 7.5 bcfd on Monday from a near two-week low of 7.2 bcfd on Saturday when wildfires again caused energy firms to shut-in wells and pipelines.
Those exports were down from an average of 8.1 bcfd during the first nine days of June but up from an average of 7.0 bcfd from the May 6-22 period when energy firms started shutting oil and gas production for the wildfires.
That compares with average Canada-to-U.S. exports of 8.3 bcfd since the start of the year and 9.0 bcfd in 2022. About 8% of the gas consumed in, or exported from, the United States comes from Canada.
Meteorologists projected the weather in the Lower 48 states would remain mostly near normal through June 20 before turning hotter than normal through from June 21-27.
With warmer weather coming, Refinitiv forecast U.S. gas demand, including exports, would rise from 93.1 bcfd this week to 97.9 bcfd next week. Those forecasts, however, were lower than Refinitiv’s outlook on Friday.
Gas flows to the seven big U.S. LNG export plants fell to an average of 11.9 bcfd so far in June, down from 13.0 bcfd in May. That is well below the monthly record of 14.0 bcfd in April due to maintenance at several facilities, including Cheniere Energy Inc’s Sabine Pass in Louisiana.
Record flows in April were higher than the 13.8 bcfd of gas the seven big plants can turn into LNG since the facilities also use some of the fuel to power equipment used to produce LNG.
(Reporting by Scott DiSavino; Editing by Alexander Smith)