US natural gas futures fell about 3% on Monday on expectations daily output will soon rise with the return to service of the Mountaineer XPress pipe in West Virginia over the weekend, while spot prices in the Northeast dropped to multi-year lows over a stormy weekend.
On its last day as the front month, gas futures for October delivery on the New York Mercantile Exchange fell 10.1 cents, or 3.2%, to $3.095 per million British thermal units (mmBtu).
Futures for November, which will soon be the front-month, were down about 3% to $3.13 per mmBtu.
In the spot market, next-day spot prices fell below $1 per mmBtu in New York (lowest since 2020), New England (lowest since 2022) and the Mid-Atlantic (lowest since 2023) as demand for the fuel fell with a powerful nor’easter storm hitting the region over the weekend.
SUPPLY AND DEMAND
Financial firm LSEG said average gas output in the US Lower 48 states rose to 112.3 billion cubic feet per day (bcfd) so far in September, tying the monthly record high of 112.3 bcfd in August.
On a daily basis, however, output was on track to drop to a near-seven-month low of 107.5 bcfd on Monday, due in part to work on the Mountaineer XPress pipe in West Virginia.
Canadian energy firm TC Energy’s Columbia Gas Transmission unit lifted the force majeure on its Mountaineer XPress pipe on Sunday, a sign that more gas will flow out of the Marcellus/Utica shale region in coming days.
Columbia Gas Transmission declared the force majeure on Thursday, affecting around 1.4 to 1.8 bcfd of gas flows, due to a mechanical issue.
Record output and mild spring weather have allowed energy firms to keep the amount of gas in inventory above the five-year (2021-2025) average since March, reaching a high of 7.7% above normal in April.
But hotter-than-normal weather over the summer forced energy firms to pull lots of gas from storage to produce the power needed to keep air conditioners humming, cutting the inventory surplus. About 40% of US power generation comes from gas-fired plants.
With the weather still hotter than normal last week, analysts predicted the amount of gas in storage slid to 2.4% above normal during the week ended September 25, down from 2.9% above normal the previous week, according to estimates ahead of Thursday’s weekly federal inventory report.
Looking forward, however, meteorologists have predicted the weather will remain mostly near normal through October 13.
With the weather turning seasonally cooler, LSEG said average gas demand in the Lower 48 states, including exports, will rise from 103.1 bcfd this week to 105.3 bcfd next week. Those forecasts were similar to LSEG’s outlook on Friday.
Average gas flows to the nine big US LNG export plants rose to 18.0 bcfd so far in September, up from 17.3 bcfd in August, but have remained short of the monthly record high of 18.9 bcfd in April.
(Reporting by Scott DiSavino; Editing by Andrea Ricci )