U.S. natural gas futures slid about 1% on Friday as record output and forecasts for less cold weather and lower heating demand than usual through at least mid-December should allow utilities to keep pulling less gas from storage than normal in coming weeks.
Analysts forecast there was about 7.2% more gas in U.S. storage on Dec. 1 than normal for this time of year.
Front-month gas futures for January delivery on the New York Mercantile Exchange fell 3.8 cents, or 1.4%, to $2.764 per million British thermal units (mmBtu) at 9:50 a.m. EST (1450 GMT).
For the week, the contract was down about 3% after losing 4% last week. That put the front-month down for a fourth week in a row for the first time since February 2023.
With production at record highs and ample amounts of gas in storage, the futures market has been sending signals for weeks that some traders have given up hope of seeing price spikes this winter. In fact, many in the market think futures for this winter (November-March) already peaked in November.
The premium of futures for 2025 (one year out) and 2029 (five years out) over 2024 both rose to record highs.
Analysts expect prices to rise in 2025 and later years as demand for gas grows, with several new U.S. liquefied natural gas (LNG) export plants entering service in the U.S., Canada and Mexico.
SUPPLY AND DEMAND
LSEG said average gas output in the Lower 48 U.S. states jumped to a record 108.4 billion cubic feet per day (bcfd) in November, up from the prior all-time high of 104.8 bcfd in October.
On a daily basis, however, output was on track to drop by 3.6 bcfd over the past four days to a preliminary one-month low of 106.5 bcfd on Friday after hitting a daily record of 110.1 bcfd on Monday. Traders have noted that preliminary data is often revised later in the day.
Meteorologists projected the weather would remain mostly warmer than normal through at least Dec. 16.
LSEG forecast U.S. gas demand in the Lower 48, including exports, would drop from 130.0 bcfd this week to 120.8 bcfd next week as the weather turns milder before rising to 124.6 bcfd with the coming of seasonally cooler weather in two weeks. The forecasts for this week and next were higher than LSEG’s outlook on Thursday.
U.S. pipeline exports to Mexico, meanwhile, fell to an average of 5.6 bcfd in November, down from 6.3 bcfd in October and a record 7.0 bcfd in August.
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 December.
Gas flows to the seven big U.S. LNG export plants rose to a record 14.3 bcfd in November, up from 13.7 bcfd in October and the prior all-time high 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 $16 at the Japan Korea Marker (JKM) in Asia.
(Reporting by Scott DiSavino; editing by Jonathan Oatis)