Front-month gas futures for April delivery on the New York Mercantile Exchange fell 2.7 cents, or 1.6%, to $1.632 per million British thermal units (mmBtu) by 9:14 a.m. EDT (1314 GMT), putting the contract on track for its lowest close since Feb. 27.
But with gas prices little changed last week, speculators cut their net short futures and options positions on the New York Mercantile and Intercontinental Exchanges for a fourth week in a row to their lowest since late January.
Prices fell as low as $1.511 per mmBtu on Feb. 27, their lowest since June 2020, as near-record output, mostly mild weather and low heating demand this winter allowed utilities to leave significantly more gas in storage than usual for this time of year.
Analysts estimated current gas stockpiles were around 41% above normal levels.
Those low prices will boost U.S. gas use to a record high in 2024, but cut production for the first time since 2020 when the COVID-19 pandemic destroyed demand for the fuel, according to the U.S. Energy Information Administration’s latest outlook.
Output was already down by around 4% over the past month as several energy firms, including EQT and Chesapeake Energy, delay well completions and cut back on other drilling activities.
In the spot market, mild weather in the U.S. West cut next-day gas prices at the Southern California Border to $1.48 per mmBtu, their lowest since July 2020.
In Texas, meanwhile, low demand and pipeline maintenance trapped gas in the Permian basin, the nation’s biggest oil producing shale formation, causing next-day prices at the Waha hub in West Texas to drop below zero for a second time this month.
Negative prices mean there is too much gas in a region due to low demand and/or pipeline constraints, and are used to encourage producers to reduce output or pay to keep pulling fuel out of the ground.
SUPPLY AND DEMAND
Financial firm LSEG said gas output in the Lower 48 U.S. states fell to an average of 100.3 billion cubic feet per day (bcfd) so far in March, down from 104.1 bcfd in February. That compares with a monthly record high of 105.5 bcfd in December 2023.
Meteorologists projected weather across the Lower 48 would remain mostly colder than normal through April 9.
But with seasonally warmer weather coming, LSEG forecast gas demand in the Lower 48, including exports, would fall from 113.6 bcfd this week to 109.0 bcfd next week. The forecast for this week was lower than LSEG’s outlook on Friday, while its forecast for next week was higher.
Gas flows to the seven big U.S. LNG export plants fell to an average of 13.2 bcfd so far in March, down from 13.7 bcfd in February. That compares with a monthly record of 14.7 bcfd in December.
Analysts do not expect U.S. LNG feedgas to return to record levels until all three liquefaction trains at Freeport LNG’s export plant in Texas return to service.
Freeport has said it expects Trains 1 and 2 to remain down until May for inspections and repairs, while Train 3 was operating. Each train at Freeport can turn about 0.7 bcfd of gas into LNG.
(Reporting by Scott DiSavino; Editing by Kirsten Donovan)
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