US natgas futures fall 7% to 3-week low on rising output, spot Waha prices turn negative

By Scott DiSavino

U.S. natural gas futures fell about 7% to a three-week low on Monday on a small increase in output over the last few days even though pipeline maintenance curtailed some gas flows from the Permian Basin in West Texas.

That pipeline work in Texas trapped some gas in the Permian shale and caused spot prices at the Waha hub to turn negative for the fourth time this year.

Gas futures NG1! for June delivery on the New York Mercantile Exchange fell 22.1 cents, or 6.6%, to settle at $3.113 per million British thermal units, putting the contract on track for its lowest close since April 25.

That put the front-month down for a fourth day in a row for the first time since late April. During those four days, gas prices fell about 15%.

Analysts said heating and cooling demand should remain low across much of the country in the coming weeks, allowing utilities to keep adding more gas into storage than normal for this time of year.

Gas stockpiles were already around 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 103.9 billion cubic feet per day so far in May, down from a monthly record of 105.8 bcfd in April. The decline so far this month, however, was lower than expected on Friday.

Part of the reason for output reductions was maintenance on some gas pipes, including U.S. energy firm Kinder Morgan's KMI 2.7-bcfd Permian Highway from the Permian Basin in West Texas to the Texas Gulf Coast.

Kinder Morgan said it will perform a turbine exchange at the Big Lake compressor station from May 13-26 that will reduce mainline capacity to around 2.2 bcfd.

Traders have noted the Permian Highway and other pipeline work trapped some gas in the Permian basin, helping spot gas prices at the Waha Hub (NG-WAH-WTX-SNL) in West Texas to drop from 94 cents per mmBtu for Friday to a negative $1.52 for Monday. That compares with an average of $1.83 over the prior seven days.

LSEG forecast average gas demand in the Lower 48, including exports, will drop from 99.0 bcfd this week to 94.6 bcfd in two weeks. Those forecasts were higher than LSEG's outlook on Friday.

The average amount of gas flowing to the eight big liquefied natural gas 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 as a result of 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 brief reductions at Freeport LNG's 2.1-bcfd plant in Texas.

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