U.S. natural gas futures held near a one-month low on Tuesday on forecasts for milder weather and less demand over the next two weeks than previously expected, ample gas in storage and as the amount of gas flowing to liquefied natural gas (LNG) export plants remain low.
On its last day as the front-month, gas futures for April delivery on the New York Mercantile Exchange fell 0.5 cent, or 0.3%, to $1.610 per million British thermal units (mmBtu) at 10:43 a.m. EDT (1443 GMT).
That puts the contract on track for its lowest close since April 23.
Futures for May, which will soon be the front-month, were also trading little changed at around $1.78 per mmBtu.
That puts May futures on track for their biggest premium over April for a second day in a row.
On Feb. 27, gas prices fell to an intraday low of $1.511 per mmBtu, their lowest since June 2020, as near-record output, mostly mild weather and low winter heating demand allowed utilities to leave significantly more gas in storage than usual for this time of year.
Analysts estimated current gas stockpiles were around 41% above normal levels.
Low prices will boost U.S. gas use to a record high in 2024, but cut production for the first time since 2020 when the COVID-19 pandemic destroyed demand for the fuel, according to the U.S. Energy Information Administration’s latest outlook.
Output was already down by around 3% over the past month as several energy firms, including EQT and Chesapeake Energy, delayed 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, low demand and ample hydropower cut power prices at the Mid-Columbia hub in Oregon to a record low of negative $8 per megawatt hour. The prior all-time low was negative $1.75 in May 2019.
Negative prices mean there is too much power supply in a region due to low demand and/or transmission constraints, and are used to encourage power generators to shut plants or pay to keep them running.
SUPPLY AND DEMAND
Financial firm LSEG said gas output in the Lower 48 U.S. states fell to an average of 100.2 billion cubic feet per day (bcfd) so far in March, down from 104.1 bcfd in February. That compares with a monthly record high of 105.5 bcfd in December 2023.
Meteorologists projected weather across the Lower 48 would remain mostly colder than normal through April 10.
But with seasonally warmer weather coming, LSEG forecast gas demand in the Lower 48, including exports, would fall from 112.3 bcfd this week to 107.1 bcfd next week. Those forecasts were lower than LSEG’s outlook on Monday.
Gas flows to the seven big U.S. LNG export plants fell to an average of 13.2 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’s export plant in Texas return to service.
Freeport has said it expects Trains 1 and 2 to remain shut until May for inspections and repairs, while Train 3 was operating. Each Freeport train can turn about 0.7 bcfd of gas into LNG.
(Reporting by Scott DiSavino Editing by Marguerita Choy)