U.S. Natgas Prices Ease on Lower Demand Forecast, Storage Oversupply

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U.S. natural gas futures eased about 1% on Tuesday from a 15-week high in the prior session on forecasts for lower demand over the next two weeks than previously expected and worries about a big oversupply of gas in storage.

Analysts forecast the amount of gas in storage was around 31% above normal levels for this time of year.

That price decline came despite a big reduction in output in recent months due to relatively low prices and an increase in gas flows to liquefied natural gas (LNG) export plants following the return to near full service of Freeport LNG’s plant in Texas after a maintenance outage.

Front-month gas futures for June delivery on the New York Mercantile Exchange fell 3.4 cents, or 1.4%, to $2.347 per million British thermal units (mmBtu) at 7:48 a.m. EDT (1148 GMT). On Monday, the contract closed at its highest since Jan. 29.

Despite Tuesday’s price decline, the contract remained in technically overbought territory for a seventh day in a row for the first time since April 2022.

In the spot market, gas prices at the Waha hub in West Texas averaged below zero for Tuesday for the fourth time this month and the 17th time since March as pipeline maintenance trapped gas in the Permian Shale in West Texas amid low demand for energy.

SUPPLY AND DEMAND

Financial firm LSEG said gas output in the Lower 48 U.S. states fell to an average of 97.2 billion cubic feet per day (bcfd) so far in May, down from 98.2 bcfd in April. That compares with a monthly record high of 105.5 bcfd in December 2023.

On a daily basis, output slid about 1.5 bcfd over the past two days to a preliminary 96.5 bcfd on Tuesday.

That put U.S. gas production down about 9% so far in 2024 after several energy firms, including EQT and Chesapeake Energy, delayed well completions and cut back on other drilling activities after prices fell to 3-1/2-year lows in February and March.

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EQT is the biggest U.S. gas producer and Chesapeake is on track to become the biggest producer after its merger with Southwestern Energy.

Meteorologists projected weather across the Lower 48 states would remain mostly near normal through May 29, except for several warmer-than-normal days from May 17-24.

LSEG forecast gas demand in the Lower 48, including exports, would rise from 91.5 bcfd this week to 92.6 bcfd next week. Those forecast were lower than LSEG’s outlook on Monday.

Gas flows to the seven big U.S. LNG export plants rose from an average of 11.9 bcfd in April to 12.7 bcfd so far in May with the return of the 2.1-bcfd Freeport LNG’s plant in Texas. That compares with a monthly record high of 14.7 bcfd in December.

The U.S. became the world’s biggest LNG supplier in 2023, ahead of recent leaders Australia and Qatar, as much higher global prices fed demand for more exports due in part to supply disruptions and sanctions linked to Russia’s war in Ukraine.

Gas was trading around $10 per mmBtu at both the Dutch Title Transfer Facility (TTF) benchmark in Europe and the Japan Korea Marker (JKM) benchmark in Asia.

(Reporting by Scott DiSavino; editing by Christina Fincher)