U.S. natural gas futures slid about 2% on Friday ahead of the long Christmas holiday weekend on record output and mild weather that should allow utilities to keep pulling less gas from storage through the end of the year.
Analysts forecast there was around 10.4% more gas in storage than usual for this time of year.
That price decline came despite forecasts for much colder weather and higher heating demand in January and as record amounts of gas flow to the U.S. liquefied natural gas (LNG) export plants.
Front-month gas futures for January delivery on the New York Mercantile Exchange fell 3.8 cents, or 1.5%, to $2.534 per million British thermal units (mmBtu) at 10:01 a.m. EST (1501 GMT).
For the week, the contract was up about 2% after falling about 29% over the prior six weeks.
Record production and ample supplies of gas in storage have weighed on gas prices for weeks, prompting some traders to forecast that futures for this winter (November-March) already peaked at $3.608 per mmBtu on Nov. 1.
Looking ahead, analysts project U.S. gas prices will rise in coming years as new LNG export plants enter service in the United States, Canada and Mexico to meet rising global demand of the fuel.
But expected delays at Exxon Mobil /QatarEnergy’s Golden Pass LNG export plant in Texas and Venture Global LNG’s Plaquemines in Louisiana have caused some analysts to reduce their forecasts for U.S. gas demand and prices in 2024.
SUPPLY AND DEMAND
Financial firm LSEG said average gas output in the lower 48 U.S. states rose to 108.6 billion cubic feet per day (bcfd) so far in December from a record 108.3 bcfd in November.
Meteorologists projected the weather would remain warmer than normal through Dec. 30 before turning near to colder than normal from Dec. 31-Jan. 6.
LSEG forecast U.S. gas demand in the Lower 48 states, including exports, would drop from 126.5 bcfd this week to 121.6 bcfd next week as many businesses and government offices shut for the Christmas holiday, before jumping to 135.8 bcfd in two weeks when the weather turns colder. The forecasts for this week and next week were higher than LSEG’s outlook on Thursday.
U.S. pipeline exports to Mexico fell to an average of 4.2 bcfd so far in December, down from 5.6 bcfd in November 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 LNG for export in December.
Gas flows to the seven big U.S. LNG export plants rose to an average of 14.6 bcfd so far in December, up from a record 14.3 bcfd in November.
The United States 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 $11 per mmBtu at the Dutch Title Transfer Facility (TTF) benchmark in Europe and $12 at the Japan Korea Marker (JKM) in Asia.
(Reporting by Scott DiSavino; Editing by Emelia Sithole-Matarise)