U.S. natural gas futures fell more than 3% to a one-week low on Friday on rising output in the United States and another big drop in global gas prices after Russia said it would send more fuel to Europe for the winter heating season.
That U.S. decline puts the contract on track to fall in October after six months of gains.
The daily decline occurred despite rising liquefied natural gas exports (LNG) and forecasts for colder weather and soaring heating demand in two weeks.
Gas prices in Europe dropped more than 10% for a second day in a row after Russian President Vladimir Putin earlier in the week told Kremlin-controlled energy giant Gazprom to start pumping gas into European gas storage once Russia finishes filling its own stocks, which may happen by Nov. 8.
Since the summer, gas prices around the world have soared to record highs as utilities scramble for LNG cargoes to refill low stockpiles in Europe and meet rising demand in Asia, where energy shortfalls have caused power blackouts in China.
U.S. futures followed global gas prices higher, reaching a 12-year high in early October on expectations demand for U.S. LNG exports would remain strong.
In Europe and Asia, gas was trading about four times higher than U.S. prices because the United States has more than enough gas in storage for winter and ample production to meet domestic and export demand.
Analysts expect U.S. gas inventories will top 3.6 tcf by the start of the winter heating season in November, which they said would be a comfortable level even though it falls short of the five-year average of 3.7 tcf.
U.S. stockpiles were currently about 3% below the five-year average for this time of year. In Europe, analysts say stockpiles were about 15% below normal.
Front-month gas futures were down 20.1 cents, or 3.5%, to $5.581 per million British thermal units (mmBtu) at 9:07 a.m. EDT (1307 GMT), putting the contract on track for its lowest close since Oct. 22.
For the week, the contract was up about 6% after falling about 6% during the prior three weeks.
For the month, the contract was down about 5% after rising about 90% during the prior six months.
Data provider Refinitiv said output in the U.S. Lower 48 states has averaged 92.4 billion cubic feet per day (bcfd) so far in October, up from 91.1 bcfd in September. That compares with a monthly record of 95.4 bcfd in November 2019.
On a daily basis, however, output was on track to reach 93.9 bcfd on Friday, its highest since July, according to preliminary data from Refinitiv.
Refinitiv projected average U.S. gas demand, including exports, would rise from 90.0 bcfd this week to 93.1 bcfd next week and 101.8 bcfd in two weeks as more homes and businesses crank up their heaters. The forecast for next week was higher than Refinitiv projected on Thursday.
The amount of gas flowing to U.S. LNG export plants has averaged 10.5 bcfd so far in October, up from 10.4 bcfd in September.
On a daily basis, however, feedgas to LNG export plants was on track to reach 11.9 bcfd on Friday, its highest level since May, according to preliminary data from Refinitiv.
With gas prices near $23 per mmBtu in Europe and $32 in Asia, versus around $6 in the United States, traders said buyers around the world will keep purchasing all the LNG the United States can produce.