US natural gas prices slide 2% on rising daily output, mild weather forecasts

By Scott DiSavino

U.S. natural gas futures slid about 2% on Monday on an increase in daily output, ample amounts of fuel in storage and forecasts for mild weather and less demand over the next two weeks than previously expected.

On its first day as the front-month, gas futures for November delivery NG1! on the New York Mercantile Exchange fell 5.1 cents, or 1.6%, from where the November contract closed on Friday to $3.155 per million British thermal units (mmBtu).

But, the front-month was still on track to close at its highest since July 22 since the higher-priced November contract was still up about 11% from where the lower-priced October contract closed on Friday when it was the front-month.

Looking forward, the premium of futures for December over November (NGX25-Z25) rose to a record high of around 7 cents per mmBtu.

In the cash market, prices at the Waha Hub (NG-WAH-WTX-SNL) in West Texas and the AECO Hub (NG-ASH-ALB-SNL) in Alberta remained in negative territory because pipelines in both regions were constrained by expected and unexpected maintenance work.

For the Waha, that was the fourth day in a row and the 13th time this year that prices were in negative territory. For AECO, that was the fifth day in a row that prices were below zero, with each day setting a fresh record low, according to LSEG pricing data.

In the tropics, the U.S. National Hurricane Center projected both Hurricane Humberto (between Bermuda and the Bahamas) and Tropical Storm Imelda (over the Bahamas) would move northeast over the next week, remaining well away from the U.S. East Coast.

Even though storms can boost gas prices by cutting output along the U.S. Gulf Coast, they are more likely to reduce prices by shutting LNG export plants and knocking out power to homes and businesses. About 40% of the power generated in the U.S. comes from gas-fired plants.

SUPPLY AND DEMAND

Financial firm LSEG said average gas output in the Lower 48 states fell to 107.5 billion cubic feet per day so far in September, down from a record monthly high of 108.3 bcfd in August.

On a daily basis, however, output was on track to rise to a preliminary three-week high of 108.4 bcfd on Sunday. That compares with an all-time daily high of 109.7 bcfd on July 28. Preliminary data is often revised later in the day.

Record output earlier this year allowed energy companies to inject more gas into storage than usual so far this summer. There was about 6% more gas in storage than normal for this time of year.

Meteorologists forecast the weather will remain mostly warmer than normal through at least October 14.

That late-season heat will likely reduce gas demand by cutting the amount of fuel used to heat homes and businesses by more than the amount of gas power generators burn to keep air conditioners humming.

LSEG projected average gas demand in the Lower 48 states, including exports, would slide from 102.4 bcfd this week to 99.7 bcfd next week. Those forecasts were lower than LSEG's outlook on Friday.

The average amount of gas flowing to the eight big U.S. LNG export plants held around 15.8 bcfd so far in September, the same as in August. That compares with a monthly record high of 16.0 bcfd in April.