U.S. natgas prices up 2% to one-week high on colder forecasts, drop in output

(Reuters) - U.S. natural gas futures climbed about 2% to a one-week high on forecasts for cooler weather and more demand next week than previously expected a continued drop in output and rising gas flows to LNG export plants, including Freeport LNG.

That price increase came despite negative spot power and gas prices in several parts of the country and a massive oversupply of gas in storage. Analysts forecast stockpiles were currently around 35% above normal levels for this time of year. [EIA/GAS][NGAS/POLL]

U.S. gas production has dropped by around 10% so far in 2024 as several energy firms, including EQT<EQT.N> and Chesapeake Energy<CHK.O>, delayed well completions and cut back on other drilling activities after prices fell to 3-1/2-year lows in February and March.

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

Front-month gas futures <NGc1> for May delivery on the New York Mercantile Exchange were up 3.8 cents, or 2.2%, to $1.795 per million British thermal units (mmBtu) at 10:05 a.m. EDT (1405 GMT), putting the contract on track for its highest close since April 10.

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

In the spot market, power and gas prices in many states, including Texas, California and Arizona, have traded below zero several times this spring due to low demand, ample renewable power supplies and pipeline maintenance that has trapped gas in Texas.

Next-day gas at the Waha hub<NG-WAH-WTX-SNL> in the Permian Shale in West Texas rose to negative 69 cents per mmBtu on Thursday, the ninth day in a row that Waha prices have averaged below zero, according to data from SNL Energy on the LSEG terminal.

In California, meanwhile, next-day power at South Path-15 (SP-15) <EL-PK-SP15-SNL> in the southern part of the state plunged by about 107% to a one-week low of negative $1 per megawatt hour on Thursday.

SUPPLY AND DEMAND

Financial firm LSEG said gas output in the Lower 48 U.S. states fell to an average of 98.2 billion cubic feet per day (bcfd) so far in April, down from 100.8 bcfd in March. That compares with a monthly record of 105.6 bcfd in December 2023.

On a daily basis, output was on track to drop by about 2.7 bcfd over the past seven days to a preliminary three-month low of 95.9 bcfd on Friday.

Meteorologists projected weather across the Lower 48 states would remain mostly colder than normal through April 26 before turning warmer than normal from April 27-May 4.

LSEG forecast gas demand in the Lower 48, including exports, would rise from 91.9 bcfd this week to 97.5 bcfd next week before sliding to 94.4 bcfd in two weeks. The forecast for next week was higher than LSEG's outlook on Thursday.

Gas flows to the seven big U.S. LNG export plants slid to an average of 11.8 bcfd so far in April, down from 13.1 bcfd in March. That compares with a monthly record of 14.7 bcfd in December.

On a daily basis, LNG feedgas was on track to rise to a preliminary 11.0 bcfd on Friday, up from a 15-month low of 9.2 bcfd on Tuesday when feedgas declined at several facilities, including Freeport LNG in Texas, Cameron LNG in Louisiana, and Cheniere Energy's <LNG.N> Sabine Pass in Louisiana and Corpus Christi in Texas.

Since Tuesday, gas flows have increased at most of those plants, including Freeport. Feedgas at Freeport was on track to reach 0.3 bcfd on Friday, up from near zero over the prior seven days.

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