U.S. natural gas futures held near a two-week low on Friday on worries about a huge storage surplus and forecasts for lower demand over the next two weeks than previously expected due primarily to a drop in feedgas to the Freeport LNG export plant in Texas.
Analysts forecast gas stockpiles were about 36% above normal levels for this time of year.
That lack of price movement occurred despite a drop in output as producers reduced drilling activities after prices fell to a 3-1/2-year low in February and March, and forecasts for colder weather to boost heating demand in two weeks.
U.S. drillers cut the number of gas rigs operating this week by one to 109, their lowest since January 2022, according to data from energy services company Baker Hughes.
Front-month gas futures for May delivery on the New York Mercantile Exchange rose 0.6 cents, or 0.3%, to settle at $1.770 per million British thermal units. On Thursday the contract closed at its lowest since March 28.
For the week, the front-month lost about 1% in its first weekly decline in four weeks.
In the spot market, next-day gas prices at the Waha hub in the Permian Basin in West Texas rose to negative $1.74 per mmBtu on April 11 from a near four-year low of negative $2.10 on April 10, according to data from SNL Energy on the LSEG terminal.
In Canada, spot gas prices at the AECO hub in Alberta fell to $1.00 per mmBtu, their lowest level since October 2022 for a fourth day in a row.
In other news, Williams Cos said it will allow the certificate for the proposed Northeast Supply Enhancement (NESE) gas pipe in Pennsylvania, New Jersey and New York to expire in May, according to a filing with federal energy regulators.
The U.S. Federal Energy Regulatory Commission approved construction of the roughly $1 billion NESE project in 2019, but Williams put it on hold because environmental regulators in New York and New Jersey did not approve water permits.
Financial firm LSEG said gas output in the Lower 48 U.S. states fell to an average of 98.8 billion cubic feet per day (bcfd) so far in April, down from 100.8 bcfd in March. That compares with a monthly record of 105.6 bcfd in December 2023.
LSEG forecast gas demand in the Lower 48, including exports, would fall from 99.3 bcfd this week to 94.4 bcfd next week as the weather warms before rising to 98.1 bcfd in two weeks with cooler temperatures.
The forecasts for this week and the next were lower than LSEG’s outlook on Thursday.
Gas flows to the seven big U.S. liquefied natural gas (LNG) export plants slid to an average of 12.5 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 fall to a one-week low of 12.0 bcfd as the amount of gas flowing to Freeport LNG holds at 0.1 bcfd for a second day in a row on Friday, down from a recent high of 1.1 bcfd on Tuesday and an average of 0.8 bcfd over the prior seven days.
Freeport said in late March it expects Trains 1 and 2 to remain shut until May for inspections and repairs, while Train 3 was operating.
But the small increase in feedgas seen on Tuesday convinced some in the market that Train 1 or 2 was returning to service early. That, however, was before Train 3 tripped late on Tuesday.
(Reporting by Scott DiSavino; Editing by Paul Simao and Leslie Adler)