U.S. natural gas futures eased about 1% to a fresh two-week low on Thursday on record output and forecasts for mild weather and less heating demand through early November than previously expected.
Traders noted prices were down even though the amount of gas flowing to liquefied natural gas (LNG) export plants was near record highs.
That price decline came ahead of a federal report expected to show last week’s storage build was smaller than usual for this time of year due in part to rising exports.
Analysts forecast U.S. utilities added 80 billion cubic feet (bcf) of gas into storage during the week ended Oct. 13. That compares with an increase of 113 bcf in the same week last year and a five-year (2018-2022) average increase of 85 bcf.
If correct, last week’s increase would boost stockpiles to 3.609 trillion cubic feet (tcf), or 4.6% above the five-year average of 3.451 tcf for the time of year.
Front-month gas futures for November delivery on the New York Mercantile Exchange fell 3.2 cents, or 1.1%, to $3.024 per million British thermal units (mmBtu) at 8:58 a.m. EDT (1258 GMT), putting the contract on track for its lowest close since Oct. 4 for a fourth day in a row.
That also put the contract down for a seventh day in a row for the first time since February 2021.
A lack of big price moves in recent weeks has cut historic or actual 30-day close-to-close futures volatility to 49.6%, the lowest since April 2022 for a third day in a row.
Historic daily volatility hit a record high of 177.7% in February 2022 and a record low of 7.3% in June 1991. Historic volatility has averaged 74.9% so far this year, compared with a record high of 92.8% in 2022 and a five-year (2018-2022) average of 57.9%.
SUPPLY AND DEMAND
Financial firm LSEG said average gas output in the Lower 48 U.S. states rose to an average of 103.6 billion cubic feet per day (bcfd) so far in October, up from 102.6 bcfd in September and a record high of 103.1 bcfd in July.
With milder weather coming, LSEG forecast U.S. gas demand, including exports, would ease from 97.6 bcfd this week to 96.9 bcfd next week. Those forecasts were lower than LSEG’s outlook on Wednesday.
Pipeline exports to Mexico slid to an average of 6.9 bcfd so far in October, down from a monthly record high of 7.2 bcfd in September.
Analysts, however, expect exports to Mexico to rise in coming months once New Fortress Energy’s plant in Altamira starts pulling in U.S. gas to turn into liquefied natural gas (LNG) for export.
Gas flows to the seven big U.S. LNG export plants rose to 13.5 bcfd so far in October with the return of Berkshire Hathaway Energy’s Cove Point export plant in Maryland, up from 12.6 bcfd in September. That compares with a record high of 14.0 bcfd in April.
On a daily basis, LNG feedgas climbed to 14.7 bcfd on Tuesday, the highest since April 2023.
The U.S. is on track to become the world’s biggest LNG supplier in 2023, ahead of recent leaders Australia and Qatar. Much higher global prices have fed demand for U.S. exports due in part to supply disruptions and sanctions linked to the war in Ukraine.
Gas was trading around $15 per mmBtu at both the Dutch Title Transfer Facility (TTF) benchmark in Europe and $18 at the Japan Korea Marker (JKM) in Asia.
(Reporting by Scott DiSavino; editing by Jonathan Oatis)