U.S. natural gas futures fell about 4% on Wednesday as the amount of gas flowing to the nation’s liquefied natural gas (LNG) export plants declined with the shutdown of the Cove Point LNG export plant in Maryland and on forecasts for milder weather and less gas demand over the next two weeks than previously expected.
Front-month gas futures for October delivery on the New York Mercantile Exchange were down 12.5 cents, or 4.4%, to $2.723 per million British thermal units (mmBtu) at 10:03 a.m. EDT (1403 GMT).
After rising about 8% over the prior two sessions, front-month futures got close to the 200-day moving average but have not settled above that key level of technical resistance since November 2022.
Bank of America said that while the heat wave in Texas this summer did almost halve the U.S. gas storage surplus, a mild winter could still leave inventories at record highs and push prices below $2 per mmBtu in the first quarter of 2024.
SUPPLY AND DEMAND
Financial firm LSEG said average gas output in the lower 48 U.S. states has eased to 102.2 billion cubic feet per day (bcfd) so far in September, down from a record 102.3 bcfd in August.
On a daily basis, however, output over the past few days was on track to drop by around 1.9 bcfd to a preliminary six-week low of 100.8 bcfd on Wednesday. Analysts have noted that preliminary data is often revised later in the day.
Meteorologists forecast the weather in the lower 48 states would remain near normal until around Sept. 29 before turning mostly warmer than usual from Sept. 30 to Oct. 5. Traders, however, noted that above normal temperatures in late September were still mild with averages expected to be around 72 degrees Fahrenheit (22.2 Celsius) versus a normal of 70 F for that time of year.
With seasonally milder weather coming, LSEG forecast U.S. gas demand, including exports, will ease from 95.6 bcfd this week to 94.5 bcfd next week. Those forecasts were lower than LSEG’s outlook on Monday.
Gas flows to the seven big U.S. LNG export plants have averaged 12.8 bcfd so far in September, up from 12.3 bcfd in August. That compares with a monthly record of 14.0 bcfd in April.
On a daily basis, however, feedgas fell to a one-week low of 12.4 bcfd due to a reduction at Berkshire Hathaway Energy’s 0.8-bcfd Cove Point LNG export plant in Maryland. Traders have said that Cove Point was on track to shut for about a week of planned maintenance around Sept. 21-29, according to company notices to customers.
Analysts at LSEG noted that one week would be a “very short” maintenance outage since the plant typically shuts for about three weeks every autumn. In 2022, it shut from around Oct. 1-27, according to LSEG data.
Pipeline exports to Mexico, meanwhile, have averaged 7.2 bcfd so far in September, up from a record 7.1 bcfd in August, according to LSEG data.
(Reporting by Scott DiSavino; Editing by Paul Simao)