U.S. natural gas futures slid about 2% to a one-week low on Thursday on forecasts for milder weather over the next two weeks than previously expected, a smaller output decline so far this month and ample amounts of gas in storage.
The price decline came despite a federal report showing an expected bigger-than-usual storage withdrawal last week when cooler-than-normal weather boosted heating demand for the fuel, and bullish forecasts for more demand over the next two weeks than previously expected as the amount of gas flowing to liquefied natural gas (LNG) export plants increases.
The U.S. Energy Information Administration (EIA) said utilities pulled 37 billion cubic feet (bcf) of gas from storage during the week ended March 29.
That was in line with the 38-bcf withdrawal analysts forecast in a Reuters poll and compares with a decrease of 29 bcf in the same week last year and a five-year (2019-2023) average decline of 1 bcf for this time of year.
Last week’s withdrawal left gas stockpiles about 39% above normal levels for this time of year.
Front-month gas futures for May delivery on the New York Mercantile Exchange fell 2.7 cents, or 1.5%, to $1.814 per million British thermal units (mmBtu) at 10:34 a.m. EDT (1434 GMT), putting the contract on track for its lowest close since March 28.
In other news, about 627,000 homes and businesses were still without power on Thursday – mostly in Maine and New Hampshire – due to storms over the past few days, according to PowerOutage.us. That was up from around 449,000 without service earlier on Thursday.
Power outages usually reduce demand for gas – at least temporarily – since generators don’t have to burn as much of the fuel to produce electricity.
SUPPLY AND DEMAND
Financial firm LSEG said gas output in the Lower 48 U.S. states fell to an average of 98.9 billion cubic feet per day (bcfd) so far in April, down from 100.8 bcfd in March. That compares with a monthly record high of 105.6 bcfd in December 2023.
As more data became available, LSEG reduced the estimated output decline so far in April from a preliminary 4.1 bcfd on Tuesday to 2.6 bcfd on Wednesday and 2.3 bcfd on Thursday.
Meteorologists projected weather across the Lower 48 would remain cooler than normal through April 7 before turning warmer than normal from April 8-19.
With seasonally warmer weather coming, LSEG forecast gas demand in the Lower 48, including exports, would fall from 104.4 bcfd this week to 103.2 bcfd next week. Those forecasts were higher than LSEG’s outlook on Wednesday.
Gas flows to the seven big U.S. LNG export plants fell to an average of 12.4 bcfd so far in April, down from 13.1 bcfd in March. That compares with a monthly record of 14.7 bcfd in December.
On a daily basis, LNG feedgas was on track to rise from a 10-week low of 11.3 bcfd on Tuesday to around 13.0 bcfd on Wednesday and Thursday as flows increase to Cheniere Energy’s Sabine Pass in Louisiana and Corpus Christi in Texas. Flows to Freeport LNG’s export plant in Texas, however, remained reduced.
Analysts do not expect U.S. LNG feedgas to return to record levels until all three liquefaction trains at Freeport 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)