US natural gas prices edge up on lower output, higher demand forecasts

U.S. natural gas futures edged up about 1% on Friday on a decline in daily output and forecasts for seasonally cooler weather in late November that should boost heating demand and force utilities to start pulling fuel out of storage by the end of the month.

Until then, however, the weather was expected to remain mild, allowing utilities to keep injecting gas into storage for a couple more weeks.

There is currently about 6% more gas in storage than normal for this time of year. Analysts projected utilities would add more gas than normal into storage this week for a fourth week in a row for the first time since October 2022.

Prior to the last few weeks, storage injections had been smaller than usual for 14 weeks in a row because many producers have reduced drilling activities so far this year after average spot monthly prices at the U.S. Henry Hub (NG-W-HH-SNL) benchmark in Louisiana fell to a 32-year low in March. Prices have remained relatively low since then, dropping to a 23-year low in October.

Front-month gas futures NG1! for December delivery on the New York Mercantile Exchange (NYMEX) were up 2.4 cents, or 0.9%, to $2.717 per million British thermal units at 8:08 a.m. EST (1308 GMT).

That put the contract up about 2% for the week after it gained 4% last week and 13% two weeks ago.

Open interest in NYMEX futures, meanwhile, rose to a record high for a sixth day in a row, reaching 1.785 million contracts on Nov. 6.

SUPPLY AND DEMAND

Financial firm LSEG said average gas output in the Lower 48 U.S. states has slid to 100.7 billion cubic feet per day (bcfd) so far in November from 101.3 bcfd in October. That compares with a record 105.3 bcfd in December 2023.

On a daily basis, output over the past four days fell by 2.0 bcfd to a preliminary five-month low of 99.6 bcfd on Friday. Analysts have noted that preliminary data is often revised later in the day.

Recent output declines were due mostly to pipeline issues and curtailments in the Gulf of Mexico for Hurricane Rafael.

The U.S. National Hurricane Center projected Rafael would circle around the middle of the Gulf of Mexico as it weakens into a tropical storm over the weekend and becomes a tropical depression near Mexico by the middle of next week.

Even though Rafael was not expected to make landfall in the U.S., several U.S. energy firms curtailed oil and gas output from offshore Gulf of Mexico platforms.

The U.S. Bureau of Safety and Environmental Enforcement said energy firms cut Gulf of Mexico gas production by about 10% on Thursday, up from 7% on Wednesday. But unlike 20 years ago, when 20% of U.S. gas production came from the federal offshore Gulf of Mexico, that offshore region only produces about 2% of the country's gas.

Meteorologists projected the weather in the Lower 48 states would remain warmer than normal through at least Nov. 23. But even warmer-than-normal weather in late November was still colder than warmer-than-normal weather in early November.

So with cooler weather coming, LSEG forecast average gas demand in the Lower 48, including exports, would rise from 102.0 bcfd this week to 104.1 bcfd next week and 110.0 bcfd in two weeks.

The amount of gas flowing to the seven big U.S. LNG export plants has slid to an average of 12.6 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.

text_section_type="notes">For gas data on the LSEG terminal type ENERGY in the search bar and then go to the GAS drop down and the NORTH AMERICA drop down.

For Interactive Map, type 'Interactive Map' in the box at upper left of the LSEG terminal

For graphics on Baker Hughes rig counts, see: http://graphics.thomsonreuters.com/15/rigcount/index.html

For next-day SNL U.S. gas prices, see: (0#SNL-NG)

For next-day SNL U.S. power prices, see: (0#SNL-PWR)

For U.S. natgas price and storage polls, see:

For U.S. nuclear power outages, see:

For U.S. Northwest hydro power report, see:

For U.S./Canada natural gas rig count vs Henry Hub futures price, see: http://tmsnrt.rs/2eT9k44

For the U.S. natural gas speed guide, see: (USGAS)

For the U.S. power speed guide, see: (USPOWER)

To determine CFTC managed money net position add (NYMEX Henry Hub options and futures combined (3023651MNET)) plus (ICE Henry Hub options and futures combined (3023391MNET) divided by four) plus (NYMEX Henry Hub swaps options and futures combined (303565BMNET) divided by four) plus (NYMEX Henry Hub penultimate gas swaps (303565CMNET) divided by four)

NYMEX Henry Hub options and futures combined (0#3CFTC023651)

NYMEX Henry Hub futures only (0#1CFTC023651)

ICE Henry Hub options and futures combined (0#3CFTC023391)

NYMEX Henry Hub swaps options and futures combined (0#3CFTC03565B)

NYMEX Henry Hub Penultimate gas swaps (0#3CFTC03565C)