U.S. natural gas futures slid about 2% to a fresh two-week low on Wednesday on forecasts for less demand over the next two weeks than previously expected.
Also weighing on prices in recent weeks has been the reduced 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 were down 3.4 cents, or 2.0%, to $1.680 per million British thermal units (mmBtu) at 8:42 a.m. EDT (1242 GMT), putting the contract on track for its lowest close since Feb. 27 for a fifth day in a row.
In total, the contract has lost about 15% over the past five days.
That price decline occurred despite a roughly 5% drop in U.S. output over the past month after gas prices collapsed to a 3-1/2-year low in February.
Those low prices will boost U.S. gas use to a record high in 2024, but cause gas production to drop for the first year since 2020, when the COVID-19 pandemic destroyed demand for the fuel, according to the U.S. Energy Information Administration’s (EIA) latest outlook.
Prices fell as low as $1.511 per mmBtu on Feb. 27, their lowest level 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.
Output is down as several energy firms, including EQT and Chesapeake Energy, delay well completions and cut back on other drilling activities.
EQT is currently the biggest U.S. gas producer and Chesapeake will soon become the biggest producer after its merger with Southwestern Energy.
In the spot market, mild weather and a lack of heating or cooling demand in the West caused next-day power for Wednesday to drop to a record low of $2.25 per megawatt hour at South Path-15 (SP-15) in Southern California, and $3.75 at the Palo Verde hub in Arizona, its lowest price since May 2020, according to data from financial firm LSEG going back to 2010.
The prior all-time low in SP-15 was $3.25 in May 2023.
SUPPLY AND DEMAND
Financial firm LSEG said gas output in the Lower 48 U.S. states has fallen 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.
Meteorologists projected weather across the Lower 48 states would remain warmer than normal through March 17 before turning to near- to colder-than-normal levels from March 18-28.
With cooler weather coming, LSEG forecast gas demand in the Lower 48 states, including exports, would rise from 109.6 bcfd this week to 112.5 bcfd next week. Those forecasts were lower than LSEG’s outlook on Tuesday.
Gas flows to the seven big U.S. LNG export plants have 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 all three liquefaction trains at Freeport LNG return to full service. Traders said Freeport Train 1 was operating, Train 2 could remain shut for another week or more, and Train 3 could exit an outage later this week.
(Reporting by Scott DiSavino; Editing by Paul Simao)