U.S. natural gas futures held near a one-week low on Tuesday as a bearish forecast for the weather to remain mostly mild through the end of October and record gas output offset a bullish rise in liquefied natural gas (LNG) exports.
Traders noted that even though the weather will remain mostly mild, it is still becoming seasonally cooler, which is slowly adding to the amount of gas burned to heat homes and businesses.
Front-month gas futures for November delivery on the New York Mercantile Exchange remained unchanged at $3.109 per million British thermal units (mmBtu) at 8:57 a.m. EDT (1257 GMT). On Monday, the contract closed at its lowest since Oct. 4.
If the contract closes in negative territory, it would be the first time it declined for five days in a row since December 2022.
A lack of big price moves in recent weeks has cut historic or actual 30-day close-to-close futures volatility to 50.4%, the lowest since April 2022.
Historic daily volatility hit a record high of 177.7% in February 2022 and a record low of 7.3% in June 1991. Historic volatility has averaged 75.2% so far this year, compared with a record high of 92.8% in 2022 and a five-year (2018-2022) average of 57.9%.
SUPPLY AND DEMAND
Financial firm LSEG said average gas output in the Lower 48 U.S. states rose to an average of 103.5 billion cubic feet per day (bcfd) so far in October, up from 102.6 bcfd in September and a record high of 103.1 bcfd in July.
With seasonally colder weather coming, LSEG forecast U.S. gas demand, including exports, would rise from 97.3 bcfd this week to 98.2 bcfd next week. The forecast for next week was higher than LSEG’s outlook on Monday.
Pipeline exports to Mexico, however, slid to an average of 6.9 bcfd so far in October, down from a monthly record high of 7.2 bcfd in September.
Analysts expect exports to Mexico to rise in coming months once New Fortress Energy’s plant in Altamira starts pulling in U.S. gas to turn into liquefied natural gas (LNG) for export.
Gas flows to the seven big U.S. LNG export plants rose to 13.5 bcfd so far in October with the return of Berkshire Hathaway Energy’s Cove Point export plant in Maryland, up from 12.6 bcfd in September. That compares with a record high of 14.0 bcfd in April.
On a daily basis, LNG feedgas was on track to hit 14.6 bcfd on Tuesday, the highest since April 2023.
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 to supply disruptions and sanctions linked to the war in Ukraine.
Gas was trading around $15 per mmBtu at both the Dutch Title Transfer Facility (TTF) benchmark in Europe and $18 at the Japan Korea Marker (JKM) in Asia.
(Reporting by Scott DiSavino; Editing by Sharon Singleton)
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