US natgas prices drop 4% on rising output, lower flows to LNG export plants

U.S. natural gas futures fell about 4% on Monday on a rise in output in recent days coupled with a decline in gas flows to liquefied natural gas export plants.

The price drop came despite forecasts for more demand this week than previously expected.

Gas futures NG1! for June delivery on the New York Mercantile Exchange fell 14.9 cents, or 3.9%, to settle at $3.646 per million British thermal units. On Friday, the contract closed at its highest since April 9.

But, with futures up about 29% over the prior two weeks, speculators last week boosted their net long futures and options positions on the New York Mercantile and Intercontinental exchanges for the first time in nine weeks, according to the U.S. Commodity Futures Trading Commission's Commitments of Traders report.

Analysts said mostly mild weather should keep heating and cooling demand low in coming week, allowing utilities to continue injecting more gas into storage than normal for this time of year.

Gas stockpiles were already about 3% above the five-year (2020-2024) normal.

SUPPLY AND DEMAND

Financial firm LSEG said average gas output in the Lower 48 U.S. states fell to 103.7 billion cubic feet per day so far in May, down from a monthly record of 105.8 bcfd in April.

On a daily basis, gas output was on track to slip to a preliminary 103.4 bcfd on May 12, down from a one-week high of 104.4 bcfd on May 10 and up from a 10-week low of 102.7 bcfd on May 6. That compares with a daily record high of 107.4 bcfd on April 18.

Analysts have noted that preliminary data is often revised later in the day.

Looking ahead, analysts said the roughly 11% drop in U.S. crude futures CL1! so far in 2025 should prompt drillers to cut back on oil production.

Any decline in oil production would ultimately reduce the amount of gas pulled out of the ground that is associated with that oil output. About 37% of U.S. gas production comes from associated gas, according to federal energy data.

Over time, analysts said any reduction in associated gas output should increase gas prices.

Meteorologists projected temperatures in the Lower 48 states would remain mostly warmer than normal through May 27.

With warmer weather starting to boost air conditioning use, LSEG forecast average gas demand in the Lower 48, including exports, will rise from 97.0 bcfd this week to 98.2 bcfd next week. The forecast for this week was higher than LSEG's outlook on Friday.

The average amount of gas flowing to the eight big LNG export plants operating in the U.S. fell to 15.1 bcfd so far in May, down from a monthly record of 16.0 bcfd in April.

The LNG feedgas decline so far this month was mostly due to reductions for maintenance at Cameron LNG's 2.0-bcfd plant in Louisiana and Cheniere Energy's LNG 3.9-bcfd Corpus Christi plant under construction and in operation in Texas, and a one-day outage at Freeport LNG's 2.1-bcfd plant in Texas on May 6.

The U.S. became the world's biggest LNG supplier in 2023, surpassing Australia and Qatar, as surging global prices fed demand for more exports, due in part to supply disruptions and sanctions linked to Russia's 2022 invasion of Ukraine.

Gas was trading around $12 per mmBtu at both the Dutch Title Transfer Facility (TRNLTTFMc1) benchmark in Europe and the Japan Korea Marker (JKMc1) benchmark in Asia.