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(Reuters) – U.S. natural gas futures fell about 4% on Tuesday on forecasts for mild weather to continue through late-November, keeping heating demand lower than usual for this time of year and allowing utilities to add more gas into storage for at least a couple more weeks.
Analysts projected utilities injected more gas than normal into storage last week for a third week in a row for the first time since October 2023.
Prior to last week, injections had been smaller than usual for 14 weeks in a row because many producers so far this year have reduced drilling activities after average spot monthly prices at the U.S. Henry Hub benchmark in Louisiana fell to a 32-year low in March. Prices have remained relatively low since then.
Front-month gas futures for December delivery on the New York Mercantile Exchange fell 11.1 cents, or 4.0%, to settle at $2.670 per million British thermal units (mmBtu).
That price drop occurred even though a hurricane threatened to reduce oil and gas output in the Gulf of Mexico later this week.
The U.S. National Hurricane Center forecast Tropical Storm Rafael would strengthen into a hurricane on Wednesday as it moves from the Caribbean Sea northwest toward Cuba and the Gulf of Mexico before it weakens back into a tropical storm and hits the U.S. Gulf Coast around Louisiana over the weekend.
Hurricanes can boost gas prices by cutting output, although only about 2% of the nation’s gas comes from the federal offshore Gulf of Mexico area. But hurricanes can also reduce prices by destroying demand for gas through power outages and knocking liquefied natural gas (LNG) export plants out of service. Some storms do both.
In the spot market, pipeline constraints caused next-day gas prices at the Waha hub in the Permian Shale in West Texas to remain in negative territory for a record 44th time this year.
Analysts said the constraints were caused in part by reductions on Kinder Morgan’s Permian Highway gas pipe in Texas that would likely continue through mid-November.
SUPPLY AND DEMAND
Financial firm LSEG said average gas output in the Lower 48 U.S. states has slid to 100.9 billion cubic feet per day (bcfd) so far in November, down from 101.3 bcfd in October. That compared with a record 105.3 bcfd in December 2023.
On a daily basis, output over the past three days was on track to drop by about 2.4 bcfd to a preliminary 26-week low of 99.2 bcfd on Tuesday. Analysts noted that preliminary data is often revised later in the day. Part of that daily decline was caused by a force majeure on part of Kinder Morgan’s El Paso pipeline after a leak on a line near a compressor in New Mexico.
Meteorologists projected the weather in the Lower 48 states would remain warmer than normal through at least Nov. 20.
LSEG forecast average gas demand in the Lower 48, including exports, would rise from 100.9 bcfd this week to 101.4 bcfd next week.
The amount of gas flowing to the seven big U.S. LNG export plants has fallen to an average of 12.2 bcfd so far in November, down from 13.1 bcfd in October. That compares with a monthly record high of 14.7 bcfd in December 2023.
The feedgas decline so far this month is mostly due to the shutdown of Freeport LNG’s 2.1-bcfd plant in Texas on Nov. 1 due to a power feed interruption at the pre-treatment facility.
Reporting by Scott DiSavino; Editing by Paul Simao and Marguerita Choy
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