U.S. natural gas futures shed more than 6% on Friday on record output, sufficient fuel in storage and lower heating demand, but prices are still headed for a weekly rise following their mid-week rally.
Front-month gas futures were down 6.6% or 11.4 cents at $1.618 per million British thermal units as of 9:38 a.m. ET (1438 GMT), but were up more than 1% for the week so far.
“The natgas market is simply in excess supply, and there is a lack of seasonal winter demand,” said Thomas Saal, senior vice president for energy at StoneX Financial.
“Prices can always fall further than you think, but it should only last a month or so. Once we are into summer and injection season starts, prices might recover.”
On Wednesday gas prices soared about 13% after Chesapeake Energy, soon to be the biggest U.S. gas producer after its merger with Southwestern Energy, cut planned production for 2024 by roughly 30% after a plunge in prices to a 3-1/2 year low.
Prices have slid more than 35% so far this year, pressured by a mild winter that has left stockpiles well above normal, while output remained near record levels despite an Arctic freeze in January that briefly cut output and sent gas demand to a record high.
The U.S. Energy Information Administration (EIA) on Thursday said utilities pulled a smaller-than-expected 60 billion cubic feet (bcf) of gas out of storage during the week ended Feb. 16.
That was lower than the 65-bcf withdrawal analysts had forecast in a Reuters poll, and compared with a withdrawal of 75 bcf during the same week a year ago and a five-year (2019-2023) average decrease of 168 bcf for this time of year.
The smaller than expected withdrawal “stretched the surplus against the averages out to 450 bcf, with additional expansion of another 100 bcf or more now possible next month,” analysts at energy advisory Ritterbusch and Associates said in a note.
Financial company LSEG said gas output in the U.S. Lower 48 states has risen to an average of 105.5 billion cubic feet per day (bcfd) so far in February from 102.1 bcfd in January, still shy of the monthly record of 106.3 bcfd in December.
U.S. energy regulators said on Thursday they would decide quickly on Venture Global LNG’s request for a one-year extension to its construction permit for its Calcasieu Pass LNG plant in Louisiana.
The announcement came on the same day that Italian electric firm Edison SPA and Portugal’s Galp Energia joined three other Venture Global LNG customers in asking to be allowed to challenge the extension request.
The European benchmark gas price was also down for the day, hitting its lowest level in almost three years on high storage levels and low demand.
Elsewhere nearly a third of Shell’s profit in the fourth quarter of 2023 came from the $2.4 billion it made in trading LNG as it captured strong demand ahead of winter, three sources close to the company told Reuters.
(Reporting by Ashitha Shivaprasad in Bengaluru; Editing by Jan Harvey)