U.S. natgas prices up 2% as warmer forecasts boost power demand

U.S. natural gas futures climbed about 2% on Friday on forecasts for warmer-than-normal weather in early October that will likely force power generators to burn more gas to keep air conditioners humming.

Prices were also up with exports to Mexico on track to hit a record high in September and as the amount of gas flowing to U.S. liquefied natural gas (LNG) export plants rises as Cheniere Energy’s Sabine Pass plant in Louisiana pulls in more fuel.

Capping those gas price gains were expectations that a tropical storm could knock out power when it hits North Carolina and Virginia this weekend, reducing the amount of gas power generators need to burn to keep the lights on.

Front-month gas futures for October delivery on the New York Mercantile Exchange rose 5.1 cents, or 2.0%, to $2.661 per million British thermal units by 9:12 a.m. EDT (1312 GMT).

For the week, the front-month was up about 1% after rising about 1% last week.

The National Hurricane Center projected Tropical Cyclone 16 would strengthen into a tropical storm later on Friday before slamming into coastal North Carolina, Virginia and Maryland over the weekend.

Analysts noted that tropical storms on the East Coast generally reduce gas demand by knocking out power to homes and businesses.

SUPPLY AND DEMAND

Financial firm LSEG said average gas output in the lower 48 U.S. states eased to 102.1 billion cubic feet per day (bcfd) so far in September, down from a record 102.3 bcfd in August.

Meteorologists forecast the weather in the lower 48 states would remain near normal until around Sept. 26 before turning mostly warmer than usual from Sept. 27-Oct. 7.

Traders noted that above normal temperatures in late September were still relatively mild, with averages expected to be around 72 degrees Fahrenheit (22.2 Celsius) versus a normal of 70 F for that time of year.

With milder weather coming next week, LSEG forecast U.S. gas demand, including exports, will ease from 95.0 bcfd this week to 94.0 bcfd next week before rising to 95.5 bcfd in two weeks when the weather warms again and exports increase.

The forecast for next week was higher than LSEG’s outlook on Thursday.

Gas flows to the seven big U.S. LNG export plants averaged 12.7 bcfd so far in September, up from 12.3 bcfd in August. That compares with a monthly record of 14.0 bcfd in April.

On a daily basis, however, feedgas was only expected to reach 12.1 bcfd on Friday due to the shutdown of Berkshire Hathaway Energy’s 0.8-bcfd Cove Point in Maryland for annual maintenance on Sept. 20.

On Thursday, total LNG feedgas fell to a one week low of 11.8 bcfd due to a brief reduction at Cheniere’s 4.5-bcfd Sabine Pass export plant.

Gas flows to Sabine were on track to rise to 4.3 bcfd on Friday, up from a one-month low of 3.8 bcfd on Thursday. That compares with an average of 4.5 bcfd over the prior several weeks.

Pipeline exports to Mexico, meanwhile, averaged 7.2 bcfd so far in September, up from a record 7.1 bcfd in August, according to LSEG data.

(Reporting by Scott DiSavino; Editing by Kirsten Donovan)