By Scott DiSavino
NEW YORK, Nov 28 – U.S. natural gas futures slid about 2% to a fresh two-month low on Tuesday on forecasts for less cold weather and lower heating demand over the next two weeks than previously expected.
Traders also noted that record output means U.S. utilities don’t have to pull as much gas out of storage as usual to meet heating demand. Analysts forecast the amount of gas in U.S. storage was about 8% above normal on Nov. 24.
On its last day as the front-month, gas futures for December delivery on the New York Mercantile Exchange fell 6.7 cents, or 2.4%, to $2.727 per million British thermal units (mmBtu) at 9:30 a.m. EST (1430 GMT).
That put the contract on track for its lowest close since Sept. 26 and kept it in technically oversold territory with a Relative Strength Index (RSI) below 30 for a second day in a row for the first time since February.
Futures for January, which will soon be the front-month, were down about 6 cents to $2.88 per mmBtu.
One bearish factor that has weighed on the futures market for most of this year has been lower spot or next-day prices at the Henry Hub benchmark in Louisiana.
The spot market has traded below front-month futures for 189 out of 226 trading days so far in 2023, according to data from financial firm LSEG. Next-day prices at the Henry Hub held near $2.74 per mmBtu for Tuesday.
SUPPLY AND DEMAND
LSEG said average gas output in the Lower 48 U.S. states rose to 107.7 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 drop by 2.6 bcfd to a preliminary one-week low of 106.7 bcfd on Tuesday from a record 109.4 bcfd on Monday. If correct, that would be the biggest one-day drop since late October.
Traders, however, noted preliminary data is often revised lower later in the day.
Meteorologists projected the weather would swing from colder than normal now to warmer than normal from Nov. 30-Dec. 12.
With less cold weather coming, LSEG forecast U.S. gas demand in the Lower 48 states, including exports, would drop from 127.3 bcfd this week to 118.9 bcfd next week. Those forecasts were lower than LSEG’s outlook on Monday.
U.s. pipeline exports to Mexico, meanwhile, fell to an average of 5.7 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 dropped to 3.9 bcfd on Monday, the lowest since December 2022.
Analysts, however, expect exports to Mexico to rise in coming months once U.S. energy company New Fortress Energy’s plant in Altamira starts pulling in U.S. gas to turn into liquefied natural gas (LNG) for export in November.
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.
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 $14 per mmBtu at the Dutch Title Transfer Facility (TTF) benchmark in Europe and $17 at the Japan Korea Marker (JKM) in Asia.
(Reporting by Scott DiSavino, Editing by Nick Zieminski)