U.S. natural gas futures eased about 1% to a three-month low on Friday on forecasts for milder weather and lower heating demand through late December than previously expected.
The combination of mild weather and near record output should keep the amount of gas utilities pull from storage lower than usual in coming weeks. Analysts forecast there was currently about 7.8% more gas in storage than usual for this time of year.
Looking to 2024, analysts started to reduce their U.S. demand forecasts after Exxon Mobil delayed the planned first liquefied natural gas (LNG) production from its Golden Pass export plant under construction in Texas to the first half of 2025 from the second half of 2024.
Front-month gas futures for January delivery on the New York Mercantile Exchange fell 2.7 cents, or 1.0%, to $2.558 per million British thermal units (mmBtu) at 10:18 a.m. EST (1518 GMT), putting the contract on track for its lowest close since Sept. 6.
That kept the front-month in technically oversold territory with a Relative Strength Index (RSI) below 30 for a third day in a row for the first time since February.
For the week, the contract was down about 9% after falling about 1% last week. That put the front-month down for a fifth week in a row for the first time since February.
With record production levels and ample storage, gas futures have been sending bearish signals for weeks that prices for this winter (November-March) likely already peaked in November.
SUPPLY AND DEMAND
Financial firm LSEG said average gas output in the Lower 48 U.S. states slid to 108.1 bcfd so far in December from a record 108.3 bcfd in November.
Meteorologists projected the weather would remain mostly warmer-than-normal through Dec. 23.
But with the normal seasonal cooling going into winter, LSEG forecast U.S. gas demand in the Lower 48, including exports, would rise from 121.3 bcfd this week to 124.8 bcfd next week and 127.3 bcfd in two weeks.
The forecast for next week was lower than LSEG’s outlook on Thursday.
U.S. pipeline exports to Mexico, meanwhile, fell to an average of 3.9 bcfd so far in December, down from 5.6 bcfd in November and a record 7.0 bcfd in August.
Analysts, however, expect exports to Mexico to rise in coming months once U.S. energy company New Fortress Energy’s plant in Altamira starts pulling in U.S. gas to turn into LNG for export in December.
Gas flows to the seven big U.S. LNG export plants rose to an average of 14.5 bcfd so far in December, up from a record 14.3 bcfd in November.
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 in part to supply disruptions and sanctions linked to the war in Ukraine.
Gas was trading around $12 per mmBtu at the Dutch Title Transfer Facility (TTF) benchmark in Europe and $16 at the Japan Korea Marker (JKM) in Asia.
(Reporting by Scott DiSavino Editing by Marguerita Choy)