U.S. natural gas prices ease on forecasts for mild weather
- Mild weather expected to keep heating demand low
- Utilities added more gas into storage than usual two weeks in a row
- Analysts project gas output to decline in 2024
U.S. natural gas futures fell on Monday on expectations that mild weather through mid-November would keep heating demand low, allowing utilities to build up gas storage for few more weeks.
Front-month gas futures for December delivery on the New York Mercantile Exchange (NYMEX) were down 2.2 cents, or 0.8%, to $2.64 per million British thermal units (MMBtu).
"It’s mainly the weather. So far, temperatures have been above normal and the outlook for any heating degree days look unlikely," said Phil Flynn, an analyst at Price Futures Group.
As of Monday, LSEG estimated 170 heating degree days for the year, unchanged from Friday's figure and significantly below the 30-year average of 253 for this time of the year.
Heating degree days, which measure the number of degrees a day's average temperature is below 65°F (18°C), are used to estimate demand to heat homes and businesses.
"Fundamentals have been thrown aside as we reach a heavily oversold situation for winter gas, but the bears will likely rule until the cold developing in the southwest moves east into more gas-centric population regions," said Gary Cunningham, director of market research at Tradition Energy. "Trading this week could be erratic with the election likely to have everyone's attention."
The U.S. presidential election is on Tuesday, with opinion polls showing Democratic Vice President Kamala Harris and former Republican President Donald Trump in a neck-and-neck race for the White House.
The U.S. Energy Information Administration (EIA) on Thursday said utilities added 78 Bft3 of gas into storage during the week ended Oct. 25. It was the first time utilities added more gas into storage than usual for two weeks in a row since October 2023. Those injections boosted stockpiles to about 5% above the five-year average.
Dutch and British wholesale gas prices rose on Monday morning as low wind speeds raised gas demand for power generation, while strong inventories and above-normal temperatures could limit further rises.
Supply and demand. Financial firm LSEG said average gas output in the Lower 48 U.S. states was unchanged at 101.3 Bft3d in November compared with October. That compared with a record 105.4 Bft3d in December 2023.
With so many firms curtailing drilling activities, analysts projected average output in calendar 2024 will decline for the first time since 2020 when the COVID pandemic cut demand for the fuel.
Looking ahead, however, analysts projected producers would boost output later this year and in 2025 to meet rising liquefied natural gas (LNG) export demand with two new export plants - Venture Global LNG's Plaquemines in Louisiana and Cheniere Energy's Corpus Christi stage 3 expansion in Texas - expected to start producing LNG later this year.
LSEG forecast average gas demand in the Lower 48, including exports, would rise from 101.0 Bft3d this week to 102.6 Bft3d next week. The forecasts for this week and next were higher than LSEG's outlook on Friday.
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