U.S. natgas prices fall 3% to 2-week low on lower demand forecast
U.S. natural gas futures dropped about 3% to two-week lows on Monday on forecasts for milder weather and less demand next week than previously expected.
Front-month gas futures for November delivery on the New York Mercantile Exchange fell 7.3 cents, or 2.8%, to $2.559 per million British thermal units (MMBtu), putting the contract on track for its lowest close since Sept. 24.
Even though the November–March heating season is still a couple of weeks away, the market seems to have given up on extreme cold that could cause prices to spike this winter with futures for March trading at a record low premium to April of just 11 cents per MMBtu.
March is the last month of the winter storage withdrawal season and April is the first month of the summer storage injection season. Since gas is primarily a winter heating fuel, traders have said summer prices should not trade above winter.
The industry calls the March–April spread the "widow maker" because rapid price moves on changing weather forecasts have forced some speculators out of business, including the Amaranth hedge fund, which lost more than $6 B in 2006.
One factor weighing on gas prices in recent weeks has been a reduction in the amount of gas power generators burned after Hurricanes Milton and Helene knocked out electric service to millions of homes and businesses.
Monday, there were still about 404,000 customers without power in Florida from Milton, which hit the state on Oct. 9, and 17,000 out in North Carolina from Helene, which hit Florida on Sept. 26 before moving inland.
In total, Milton caused around 3.4 MM customers to lose power, while Helene caused roughly 6 MM outages.
The U.S. National Hurricane Center, meanwhile, projected there was a 50% chance that a disturbance in the Atlantic Ocean would strengthen into a tropical cyclone over the next week as it moves toward Puerto Rico.
Supply and demand. Financial firm LSEG said average gas output in the Lower 48 U.S. states slid to 101.4 Bft3d so far in October, down from 101.8 Bft3d in September. That compares with a record 105.5 Bft3d in December 2023.
That is because many producers reduced their drilling activities so far this year 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.
Meteorologists projected the weather in the Lower 48 states will switch from colder than normal from Oct. 14–17 to warmer than normal from Oct. 18–29.
With seasonally warmer weather coming, LSEG forecast average gas demand in the Lower 48, including exports, will slide from 97.5 Bft3d this week to 95.5 Bft3d next week.
The forecast for this week was higher than LSEG's outlook on Friday, while its forecast for next week was lower.
Berkshire Hathaway Energy's 0.8- Bft3d Cove Point LNG export plant in Maryland returned to service after three weeks of maintenance over the weekend, boosting gas flows to the seven big U.S. LNG export plants to an average of 12.7 Bft3d so far in October, the same as September.
That compares with a monthly record high of 14.7 Bft3d in December 2023.
On a daily basis, feedgas to the LNG plants reached 13.8 Bft3d on Oct. 12, the most since March 2024.
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