U.S. natural gas futures held near a five-week high on Tuesday as the market took a breather after soaring 9% in the prior session, with forecasts for lower demand than previously expected over the next two weeks offsetting a drop in output and expectations heating demand will rise when the weather turns seasonally cold in late November.
Front-month gas futures for December delivery on the New York Mercantile Exchange (NYMEX) were down 1.1 cents, or 0.4%, to $2.909 per million British thermal units (mmBtu) at 8:11 a.m. EST (1311 GMT). On Monday, the contract closed at its highest price since Oct. 3.
Open interest in NYMEX futures, meanwhile, rose to a record high for an eighth day in a row, reaching 1.801 million contracts on Nov. 8.
Analysts said utilities likely added more gas to storage than usual during the mild week ended Nov. 8, but were so far uncertain whether they would add or pull gas during the week ended Nov. 15 since supply and demand were very close.
There is currently about 6% more gas in storage than normal for this time of year. After weeks of mild weather, analysts said the expected build during the week ended Nov. 8 would be the first time utilities added more gas to storage than usual for four weeks in a row since October 2022. Prior to the last few weeks, however, injections had been smaller than usual for 14 straight weeks because many producers reduced drilling activities this year after average spot monthly prices at the U.S. Henry Hub benchmark in Louisiana fell to a 32-year low for the month of March. Prices have remained relatively soft since then, dropping to a 23-year low for the month of October.
SUPPLY AND DEMAND
Financial firm LSEG said average gas output in the Lower 48 U.S. states has slid to 100.0 billion cubic feet per day (bcfd) so far in November, down from 101.3 bcfd in October. That compares with a record 105.3 bcfd in December 2023.
On a daily basis, output over the past four days was down by 2.2 bcfd to a preliminary nine-month low of 98.3 bcfd on Tuesday. Analysts have noted that preliminary data is often revised later in the day. Some of that output drop was due to lingering production curtailments in the Gulf of Mexico for Hurricane Rafael, which dissipated last weekend.
Meteorologists projected the weather in the Lower 48 states will remain warmer than normal through Nov. 20 before turning near normal from Nov. 21-27.
With seasonally colder weather coming, LSEG forecast average gas demand in the Lower 48, including exports, would rise from 107.7 bcfd this week to 109.9 bcfd next week. Those forecasts were lower than LSEG’s outlook on Monday.
The amount of gas flowing to the seven big U.S. LNG export plants has held at an average of 13.1 bcfd so far in November, the same as in October. That compares with a monthly record high of 14.7 bcfd in December 2023.
The U.S. became the world’s biggest LNG supplier in 2023, ahead of recent leaders Australia and Qatar, as much higher global prices feed demand for more exports due in part to supply disruptions and sanctions linked to Russia’s invasion of Ukraine in February 2022.
Gas prices traded around $14 per mmBtu at both the Dutch Title Transfer Facility (TTF) benchmark in Europe and the Japan Korea Marker (JKM) benchmark in Asia.
(Reporting by Scott DiSavino; Editing by Paul Simao)