U.S. natural gas futures slid about 2% to a three-week low on Friday on record output that should enable utilities to keep injecting gas into storage through late November.
Utilities usually start pulling gas out of storage to meet heating demand in mid-November. U.S. gas stockpiles were already 6% above normal in the week ended Nov. 10 and were expected to reach 7% above normal in the week ended Nov. 17, according to federal energy data and analysts estimates.
Front-month gas futures for December delivery on the New York Mercantile Exchange fell 5.9 cents, or 1.9%, to $3.003 per million British thermal units (mmBtu) at 8:55 a.m. EST (1355 GMT), putting the contract on track for its lowest close since Oct. 24.
For the week, the contract was down about 1% after falling about 14% last week.
With production at record highs and ample amounts of gas in storage, the futures market is sending signals that it has started to give up hope of seeing price spikes during the winter of 2023-2024.
The premium of futures for January over December fell to just 17 cents per mmBtu, its lowest since November 2022, and the premium of futures for 2025 over 2024 rose to 74 cents per mmBtu, its highest on record for a second day in a row.
Analysts expect prices to rise in 2025 as gas demand rises once several new liquefied natural gas (LNG) export plants enter service in the U.S., Canada and Mexico.
In fact, based on current futures, the gas market may have already seen its highest closing price this winter (November-March) in early November when the front-month settled at $3.52 per mmBtu on Nov. 3.
It is actually not unusual for the highest price of the winter season to occur in November. Four of the highest prices seen during the past five winters occurred during November rather than January, which is traditionally the coldest month of the year. Traders noted that was because the anticipation of extreme cold is usually worse than the actual weather itself.
The highest winter prices were $7.31 per mmBtu on Nov. 23, 2022, during the winter of 2022-2023; $6.27 on Jan. 27, 2022, during the winter of 2021-2022; $3.24 on Nov. 2, 2020, during the winter of 2020-2021; $2.86 on Nov. 5, 2019 during the winter of 2019-2020; and $4.84 on Nov. 14, 2018, during the winter of 2018-2019.
SUPPLY AND DEMAND
Financial firm LSEG said average gas output in the Lower 48 U.S. states rose to 107.2 billion cubic feet per day (bcfd) so far in November, up from a record 104.2 bcfd in October.
Over the past five days, however, output was on track to drop by about 2.8 bcfd to a preliminary two-week low of 105.7 bcfd on Friday.
Meteorologists projected the weather would remain warmer than normal through Nov. 21 before turning close to colder than normal from Nov. 22-Dec. 2.
With colder weather coming, LSEG forecast U.S. gas demand in the Lower 48 states, including exports, would rise from 112.0 bcfd this week to 112.4 bcfd next week before soaring to 126.7 bcfd in two weeks. The forecast for next week was lower than Refinitiv’s outlook on Thursday.
Gas flows to the seven big U.S. LNG export plants rose to an average of 14.3 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 Nick Zieminski)