U.S. natural gas futures slid about 3% on Wednesday on forecasts for milder weather and lower demand over the next two weeks than previously expected.
After rising for six days in a row to an eight-month high earlier this week, front-month gas futures for November delivery on the New York Mercantile Exchange fell 10.7 cents, or 3.2%, to $3.275 per million British thermal units (mmBtu) at 10:11 a.m. EDT (1411 GMT) on Wednesday.
On Tuesday, the contract closed at its highest since Jan. 23 for a third day in a row.
Wednesday’s price drop pushed the front-month out of technically overbought territory for the first time in five days.
In the U.S. spot market, next-day gas for Wednesday at the Henry Hub benchmark in Louisiana rose to $3.34 per mmBtu, its highest since January 2023 for a third day in a row.
The spot market, however, will continue to weigh on futures so long as next-day prices remain below the front-month. Next-day prices have closed below the front-month for 159 of the 194 trading days so far this year, according to data from financial firm LSEG.
Exxon Mobil agreed to buy U.S. rival Pioneer Natural Resources in an all-stock deal valued at $59.5 billion that would make it the biggest producer in the Permian shale, the largest U.S. oil field, and secure a decade of low-cost production.
Global gas demand, meanwhile, is expected to experience slower growth to 2026 after peaking in mature markets like Europe and North America, according to the International Energy Agency (IEA).
SUPPLY AND DEMAND
Financial firm LSEG said average gas output in the Lower 48 U.S. states rose to 102.8 billion cubic feet per day (bcfd) so far in October, up from 102.6 bcfd in September, but still below the monthly record of 103.1 bcfd in July.
On a daily basis, however, output was on track to drop by 1.9 bcfd over the past two days to a preliminary one-week low of 102.4 bcfd on Wednesday. Energy traders noted preliminary data is often revised later in the day.
With seasonally cooler weather coming, LSEG forecast U.S. gas demand, including exports, would rise from 94.5 bcfd this week to 95.8 bcfd next week. Those forecasts were lower than LSEG’s outlook on Tuesday.
Pipeline exports to Mexico held near 7.2 bcfd so far in October, the same as the monthly record high hit in September.
Analysts expect exports to Mexico to rise even higher in coming months once New Fortress Energy’s plant in Altamira starts pulling in U.S. gas to turn into liquefied natural gas (LNG) for export.
Gas flows to the seven big U.S. LNG export plants rose to 12.9 bcfd so far in October, up from 12.6 bcfd in September, but still well below the record high of 14.0 bcfd in April.
Energy traders said they expect total LNG feedgas to rise to near record levels over the next week or so once Berkshire Hathaway Energy’s 0.8-bcfd Cove Point facility in Maryland exits a maintenance outage.
Cove Point shut around Sept. 20. Analysts at LSEG have said the plant usually shuts for about three weeks of maintenance each autumn.
The U.S. is on track to become the world’s biggest LNG supplier in 2023, ahead of recent leaders Australia and Qatar. Much higher global prices have fed demand for U.S. exports due to supply disruptions and sanctions linked to the war in Ukraine.
Gas was trading around $15 per mmBtu at the Dutch Title Transfer Facility (TTF) benchmark in Europe and $14 at the Japan Korea Marker (JKM) in Asia.
(Reporting by Scott DiSavino; editing by Jonathan Oatis)