U.S. natural gas futures slid about 2% to a fresh one-week low on forecasts for milder weather and lower heating demand over the next two weeks than previously expected.
Another factor weighing on prices in recent weeks has been the low amount of gas flowing to liquefied natural gas (LNG) export plants due to ongoing outages at Freeport LNG’s plant in Texas.
Front-month gas futures for April delivery on the New York Mercantile Exchange fell 4.1 cents, or 2.3%, to $1.764 per million British thermal units (mmBtu) by 8:57 a.m. EDT (1257 GMT), putting the contract on track for its lowest close since Feb. 27 for a third day in a row.
Over the past four days of losses, the contract has lost about 9%.
Those price declines came despite a drop in output over the past month after gas prices collapsed to a 3-1/2-year low in February.
Prices fell as low as $1.511 per mmBtu on Feb. 27, their lowest since June 2020, as near-record output, mostly mild weather and low heating demand this winter allowed utilities to leave significantly more gas in storage than usual for this time of year.
Analysts estimated current gas stockpiles were around 38% above normal levels.
Even though prices declined last week, speculators cut their net short futures and options positions on the New York Mercantile and Intercontinental Exchanges for a second week in a row to their lowest level since late January.
In other news, EQT, currently the biggest U.S. gas producer, decided to buy back its former unit, Equitrans Midstream, which is building the long-delayed $7.6 billion Mountain Valley gas pipe from West Virginia to Virginia.
SUPPLY AND DEMAND
Financial firm LSEG said gas output in the Lower 48 U.S. states fell to an average of 100.4 billion cubic feet per day (bcfd) so far in March, down from 104.1 bcfd in February. That compares with a monthly record of 105.5 bcfd in December 2023.
Traders said the output drop showed that several energy firms, including EQT and Chesapeake Energy, soon to become the biggest U.S. gas producer after its merger with Southwestern Energy, were following through on plans to cut production this year.
Meteorologists projected weather across the Lower 48 states would remain warmer than normal through March 18 before turning to near- to colder-than-normal levels from March 19-26.
With cooler weather coming, LSEG forecast U.S. gas demand in the Lower 48, including exports, would rise from 112.3 bcfd this week to 113.2 bcfd next week. The forecast for next week was lower than LSEG’s outlook on Monday.
Gas flows to the seven big U.S. LNG export plants slid to an average of 13.4 bcfd so far in March, down from 13.7 bcfd in February. That compares with a monthly record of 14.7 bcfd in December.
Analysts do not expect U.S. LNG feedgas to return to record levels until Freeport LNG is back at full power, which some market watchers say could happen in mid-March.
(Reporting by Scott DiSavino; Editing by Kirsten Donovan)