U.S. natural gas prices eased on Tuesday on record output and forecasts for milder weather that should allow utilities to leave more gas in storage than usual through late December.
Front-month gas futures for January delivery on the New York Mercantile Exchange (NYMEX) were down 7.9 cents, or 3.2%, lower at $2.42 per million British thermal units as of 10:01 a.m. EST, (1501 GMT). Prices were up for the last four sessions after being in oversold territory.
Financial firm LSEG said average gas output in the Lower 48 U.S. states has risen to 108.5 bcfd so far in December from a record 108.3 bcfd in November.
“Prices are falling because of abundance of supply and warmer weather than expected… Since the last few days, the market is in a consolidation phase where it may go sideways until we get more information about what kind of weather we’re going to have in January,” said Thomas Saal, senior vice president for energy at StoneX Financial.
LSEG forecast U.S. gas demand in the Lower 48, including exports, at 125.5 bcfd this week. However, demand was projected to slide to 120.9 bcfd during the next week when many businesses and government offices shut for the Christmas holiday.
Support from the weather factor has been limited with comparatively mild temperature views in key regions now extended into next month, analysts at energy advisory Ritterbusch and Associates said in a note.
“With each day that the temperature forecasts stretch further into January, the more important a supply surplus will become.”
Record production and ample gas in storage prompted some traders to forecast that prices had already peaked this winter (November-March) in November.
Gas flows to the seven big U.S. LNG export plants have risen to an average of 14.7 bcfd so far in December, up from a record 14.3 bcfd in November.
Traders also were keeping an eye on reports that a number of container ships are anchored in the Red Sea and others have turned off tracking systems as traders adjust routes and prices in response to maritime attacks by Yemen’s Iran-aligned Houthis on the world’s main East-West trade route.
Goldman Sachs noted that disruption to energy flows in the Red Sea is unlikely to have large effects on crude oil and liquefied natural gas (LNG) prices as vessel redirection opportunities imply that production should not be directly affected.
Several LNG vessels have changed course in recent days to avoid the Red Sea region.
Dutch and British gas prices fell, with healthy gas supply and weaker demand offsetting wider geopolitical concerns.
(Reporting by Sherin Elizabeth Varghese and Ashitha Shivaprasad in Bengaluru; Editing by Paul Simao)