U.S. natgas futures falls 3% on mild weather and low heating demand through mid November

U.S. natural-gas futures dropped about 3% Friday due to record output and forecasts of mild weather and low heating demands through mid-November. This should allow utilities the ability to inject more gas into storage for at least a few more weeks.

This price drop was despite the maintenance of Berkshire Hathaway Energy’s 0.8 billion cubic feet per day (bcfd), Cove Point liquefied gas (LNG export plant in Maryland) which has been returned to service. This will increase U.S. gas demand for exports.

The return of Freeport LNG to Texas’s export facility was still awaited by the market. Freeport stated that it expected the facility to be back in partial service by early to mid-November after an unexpected shutdown on June 8, following an explosion at a pipeline.

According to Refinitiv data, at least three vessels were headed to Freeport. Prism Brilliance, Prism Diversity and Prism Courage were waiting at the plant’s coast. Prism Courage was due to arrive on Nov. 1.

The front-month gas futures fell 19.1cents or 3.3% on the first day to settle at $5.684 per Million British Thermal Units (mmBtu)

The front-month was up 10% since the December contract traded much higher than the current expired November future settlement. This would mark the closest close since Oct. 18, and the largest daily percentage gain since mid-September.

After falling 23% last week, the contract saw a gain of 15% for the week. This would be the contract’s first weekly gain in ten weeks.

U.S. futures for gas are up 53% so far this year, as rising global gas prices fuel demand for U.S. imports. This is due to supply disruptions and sanctions related to Russia’s invasion of Ukraine on February 24th.

Gas was trading at $32 per mmBtu at the Dutch Title Transfer Facility (TTF) in Europe and $30 at the Japan-Korea Marker (JKM) in Asia.

U.S. gas prices are far below global prices due to the United States being the world’s largest producer of all fuel. However, capacity constraints and the Freeport outage have prevented the country from exporting any more LNG.

Refinitiv, a data provider, reported that the average U.S. gas output rose to 99.5 billion cubic feet per month in October. This is an increase from September’s monthly record of 99.4.

Refinitiv forecasted that average U.S. gas consumption would rise from 94.3 to 97.0 bcfd this Week to 101.6 bcfd within two weeks. This is due to the onset of cooler weather. Refinitiv’s forecast for next week was more optimistic than Thursday’s. This is due to the expected increase in LNG exports following the return of Cove Point.

Due to the Cove Point outage in October, the average amount of gas flowing into U.S. LNG export plant plants dropped to 11.2 BCFD. This is down from 11.5 BCFD in September and far below the monthly record of 12.9 BCFD in March. One3.8 bcfd can be converted into LNG by the seven largest U.S. export facilities.

Around 60% or 6.3 billion cubic feet of U.S. LNG exports were sent to Europe in the first nine months of 2022. This was because shippers diverted cargo to Asia to get higher prices. Only 29% or 2.8 bcfd of U.S. LNG exports to Europe last year.

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