US natgas prices fell 4% on record output, mild weather forecasts

U.S. natural gas futures fell about 4% on Tuesday on record output in March and forecasts for milder weather and lower demand next week than previously expected.

Prices fell despite record gas flows to liquefied natural gas (LNG) export plants in March.

Gas futures NG1! for May delivery on the New York Mercantile Exchange fell 16.8 cents, or 4.1%, to settle at $3.951 per million British thermal units (mmBtu). On Monday, the contract closed at its highest since March 19 for a second day in a row.

Energy traders said mild weather and low demand likely allowed utilities to add gas to storage in March for the first time since 2012 and only the second time in history.

But gas stockpiles were still about 5% below normal levels for this time of year after extremely cold weather in January and February forced energy firms to pull large amounts of gas out of storage, including record amounts in January.

In the spot market, gas prices at the Waha Hub (NG-WAH-WTX-SNL) in the Permian shale in West Texas turned negative for the third time this year as pipeline maintenance trapped gas associated with oil production in the basin.

In the past, pipeline constraints also caused next-day Waha prices to turn negative a record 49 times in 2024, once in 2023, six times in 2020 and 17 times in 2019.

With Permian oil production hitting record highs every year since at least 2016, according to data from the U.S. Energy Information Administration and the Federal Reserve Bank of Dallas, energy firms have had a hard time building gas pipes fast enough to keep up with soaring associated gas output.

Permian gas production has also hit record highs every year since at least 2018.

SUPPLY AND DEMAND

Financial firm LSEG said average gas output in the Lower 48 U.S. states rose to a record 106.1 billion cubic feet per day (bcfd) in March, up from the prior all-time high of 105.1 bcfd in February.

Meteorologists projected temperatures in the Lower 48 states would remain mostly warmer than normal through April 16.

LSEG forecast average gas demand in the Lower 48, including exports, will rise from 102.9 bcfd this week to 105.0 bcfd next week. The forecast for next week was lower than LSEG's outlook on Monday.

The average amount of gas flowing to the eight big operating U.S. LNG export plants rose to a record 15.8 bcfd in March, up from the prior all-time high of 15.6 bcfd in February, as new units at Venture Global's VG 3.2-bcfd Plaquemines LNG plant under construction in Louisiana entered service.

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 traded around $13 per mmBtu at both the Dutch Title Transfer Facility (TTF) (TRNLTTFMc1) benchmark in Europe and the Japan Korea Marker (JKM) (JKMc1) benchmark in Asia.