U.S. natural gas futures held near a two-week low on Friday as bullish forecasts for colder weather around the U.S. Thanksgiving holiday and record amounts of gas flowing to liquefied natural gas (LNG) export plants offset bearish forecasts for mild weather over the next 10 days or so and record output.
That mild weather this week and next will limit heating demand and, along with record output, should allow utilities to keep injecting gas into storage through at least late November.
Front-month gas futures for December delivery on the New York Mercantile Exchange were up 0.7 cents, or 0.2%, to $3.048 per million British thermal units (mmBtu) at 8:58 a.m. EST (1358 GMT). On Thursday, the contract closed at its lowest since Oct. 25 for a third day in a row.
For the week, the front-month was down about 13% after gaining about 11% last week. That would be the biggest weekly percentage decline since the contract lost about 16% during the week ended May 26.
The U.S. Energy Information Administration (EIA) did not release its weekly gas storage report on Thursday due to a planned systems upgrade. EIA said it will resume its regular schedule next week.
Analysts forecast utilities pulled about 7 billion cubic feet (bcf) of gas out of storage for the first time this season as cold weather during the week ended Nov. 3 prompted homes and businesses to crank up their heaters, before injecting about 45 bcf of gas back into storage with the return of milder weather this week.
SUPPLY AND DEMAND
LSEG said average gas output in the Lower 48 U.S. states has risen to 107.2 billion cubic feet per day (bcfd) so far in November, up from a record 104.2 bcfd in October.
On a daily basis, output was on track to hit a record 108.1 bcfd on Friday, which would top the current daily all-time of 108.0 bcfd on Nov. 4.
Meteorologists projected the weather would remain mostly warmer than normal through Nov. 23 before turning colder than normal on Nov. 24-25. Traders noted that even though the weather would remain mild for a couple of weeks, temperatures were still expected to decline with the coming of winter.
LSEG forecast that cooler weather would cause U.S. gas demand in the Lower 48 states, including exports, to jump from 101.7 bcfd this week to 107.9 bcfd next week before easing to 106.8 bcfd in two weeks when many businesses and government offices will shut for several days around the Thanksgiving holiday.
The forecasts for this week and next were similar to LSEG’s outlook on Thursday.
Pipeline exports to Mexico have fallen to an average of 5.5 bcfd so far in November, down from 6.5 bcfd in October and a record 7.0 bcfd in August. On a daily basis, exports to Mexico fell even further to a seven-month low of just 4.6 bcfd on Thursday.
Analysts, however, expect U.S. exports to Mexico will rise by the end of the year once the first 0.18-bcfd liquefaction train at U.S.-based New Fortress Energy’s plant in Altamira in Mexico starts pulling in U.S. gas to turn into LNG for export.
Gas flows to the seven big U.S. LNG export plants have risen to an average of 14.1 bcfd so far in November, up from 13.7 bcfd in October and a monthly record of 14.0 bcfd in April.
(Reporting by Scott DiSavino; Editing by Paul Simao)