U.S. natural gas futures held near a one-month low on Friday as a bullish rise in the amount of gas flowing to liquefied natural gas (LNG) export plants offset bearish forecasts that mild weather will keep heating demand low through early November.
Front-month gas futures for November delivery on the New York Mercantile Exchange remained unchanged at $2.349 per million British thermal units (mmBtu) at 8:26 a.m. EDT. On Thursday, the contract closed at its lowest since Sept. 18.
That kept the front month in technically oversold territory for a third day in a row for the first time since July.
For the week, the contract was down about 11% after falling about 8% last week. That puts it down about 19% over the last three weeks.
Looking ahead, the market is showing signs of giving up on thoughts that extreme cold could cause prices to spike this winter with futures for March 2025 trading at a record low premium over April 2025 of just 6 cents per mmBtu.
March is the last month of the winter storage withdrawal season and April is the first month of the summer storage injection season. Since gas is primarily a winter heating fuel, traders have said summer prices should not trade above winter.
If the March-April 2025 contract trades in contango, with the April contract priced higher than March, it could be the earliest switch from backwardation, with the March contract priced higher than April, in recent years.
The March-April 2024 spread did not trade in contango until Dec. 13. That compares with Jan. 25 for the March-April 2023 spread, never for the March-April 2022 spread and Dec. 8 for the March-April 2021 spread, according to seasonality data from LSEG.
The industry calls the March-April spread the “widow maker” because rapid price moves on changing weather forecasts have forced some speculators out of business, including the Amaranth hedge fund, which lost more than $6 billion in 2006.
SUPPLY AND DEMAND
Financial group LSEG said average gas output in the Lower 48 U.S. states slipped to 101.4 billion cubic feet per day (bcfd) so far in October, down from 101.8 bcfd in September. That compares with a record 105.5 bcfd in December 2023.
Analysts projected that 2024 would be the first time output declines since 2020, when the COVID-19 pandemic cut demand for the fuel.
That’s because many producers reduced their drilling activities earlier this year after average spot monthly prices at the U.S. Henry Hub benchmark in Louisiana fell to a 32-year low in March. Prices have remained relatively low since then.
Meteorologists projected the weather in the Lower 48 states will remain mostly warmer than normal through Nov. 2.
LSEG forecast that unseasonably warm weather would cause average gas demand in the Lower 48, including exports, to slide from 97.9 bcfd this week to 96.4 bcfd next week before rising to 99.9 bcfd in two weeks.
The forecasts for this week and next were similar to LSEG’s outlook on Thursday.
The amount of gas flowing to the seven big U.S. LNG export plants rose to an average of 13.0 bcfd so far in October from 12.7 bcfd in September. That compares with a monthly record high of 14.7 bcfd in December 2023.
On a daily basis, LNG feedgas hit an eight-month high of 14.4 bcfd on Thursday.
(Reporting by Scott DiSavino; editing by Barbara Lewis)