U.S. natgas futures ease on rising output, mild weather forecasts

Oct 26 (Reuters) – U.S. natural gas futures eased on Tuesday, as the market takes a break after soaring almost 12% in the prior session on rising output and forecasts for the weather to remain milder than normal through early November. Though the weather is expected to remain mild, prices declined as meteorologists forecast next week will be cooler and heating demand higher than previously expected and as a rise in global gas prices keeps demand for U.S. liquefied natural gas (LNG) exports strong. Gas prices around the world were trading near record highs that were about six times higher than prices in the United States, as utilities in Europe and Asia scramble for all the fuel they can get to refill stockpiles ahead of the winter heating season and meet current energy shortfalls causing power blackouts in China. On its second to last day as the front-month, gas futures for November delivery fell 8 cents, or 1.4%, to $5.818 per million British thermal units (mmBtu) at 7:38 a.m. EDT (1138 GMT). On Monday, the contract soared 11.7% to its highest close since Oct. 5 when it settled at its highest since December 2008. Even though U.S. gas was trading near its highest in 12 years, U.S. prices have been held back from reaching the lofty levels seen in Europe and Asia. That’s because the United States has more than enough gas in storage for the winter, ample production to meet domestic demand and U.S. LNG export plants were already operating near full capacity so no matter how high overseas prices rise, the United States could not produce more LNG for export. Analysts expect U.S. gas inventories will reach 3.6 trillion cubic feet (tcf) by the start of the winter heating season in November, which they said would be a comfortable level even though it falls short of the 3.7 tcf five-year average. U.S. stockpiles were currently about 4% below the five-year (2016-2020) average for this time of year. In Europe, analysts say stockpiles were about 15% below normal. Data provider Refinitiv said output in the U.S. Lower 48 states has averaged 92.2 billion cubic feet per day (bcfd) so far in October, up from 91.1 bcfd in September. That compares with a monthly record of 95.4 bcfd in November 2019. Refinitiv projected average U.S. gas demand, including exports, would rise from 89.2 bcfd this week to 92.4 bcfd next week as more homes and businesses turn on their heaters. The forecast for next week was higher than Refinitiv projected on Monday. Refinitiv said the amount of gas flowing to U.S. LNG export plants has averaged 10.4 bcfd so far in October, the same as in September, but was expected to rise in coming weeks as some liquefaction trains exit maintenance outages. With gas prices near $30 per mmBtu in Europe and $34 in Asia, versus around $6 in the United States, traders said buyers around the world will keep purchasing all the LNG the United States could produce. But no matter how high global gas prices rise, the United States has the capacity to turn only about 10.5 bcfd of gas into LNG. Global markets will have to wait until later this year to get more, when the sixth liquefaction train at Cheniere Energy Inc’s Sabine Pass and Venture Global LNG’s Calcasieu Pass in Louisiana are expected to start producing LNG in test mode. Week ended Week ended Year ago Five-year Oct 22 Oct 15 Oct 22 average (Forecast) (Actual) Oct 22 U.S. weekly natgas storage change (bcf): 79 92 32 62 U.S. total natgas in storage (bcf): 3,540 3,461 3,951 3,674 U.S. total storage versus 5-year average -3.6% -4.2% Global Gas Benchmark Futures ($ per mmBtu) Current Day Prior Day This Month Prior Year Five Year Last Year Average Average 2020 (2016-2020) Henry Hub 5.89 5.90 2.84 2.13 2.66 Title Transfer Facility (TTF) 30.48 29.98 4.89 3.24 5.19 Japan Korea Marker (JKM) 33.58 33.26 5.97 4.22 6.49 Refinitiv Heating (HDD), Cooling (CDD) and Total (TDD) Degree Days Two-Week Total Forecast Current Day Prior Day Prior Year 10-Year 30-Year Norm Norm U.S. GFS HDDs 192 179 192 196 208 U.S. GFS CDDs 17 21 21 24 22 U.S. GFS TDDs 209 200 213 220 230 Refinitiv U.S. Weekly GFS Supply and Demand Forecasts Prior Week Current Week Next Week This Week Five-Year Last Year Average For Month U.S. Supply (bcfd) U.S. Lower 48 Dry Production 92.0 93.0 93.1 87.9 83.1 U.S. Imports from Canada 7.4 7.4 7.0 7.7 7.5 U.S. LNG Imports 0.0 0.0 0.0 0.1 0.1 Total U.S. Supply 99.4 100.4 100.1 95.7 90.7 U.S. Demand (bcfd) U.S. Exports to Canada 1.9 1.9 1.8 2.2 2.0 U.S. Exports to Mexico 6.0 5.9 5.8 5.6 5.0 U.S. LNG Exports 10.7 11.0 11.4 9.4 3.7 U.S. Commercial 6.4 7.4 8.7 9.9 6.8 U.S. Residential 7.2 9.2 11.6 13.6 7.2 U.S. Power Plant 26.4 25.5 24.1 29.1 27.7 U.S. Industrial 21.4 21.7 22.3 23.9 21.6 U.S. Plant Fuel 4.5 4.6 4.6 4.6 4.5 U.S. Pipe Distribution 1.8 1.9 2.0 1.9 1.7 U.S. Vehicle Fuel 0.1 0.1 0.1 0.1 0.1 Total U.S. Consumption 67.8 70.4 73.4 83.1 69.6 Total U.S. Demand 86.4 89.2 92.4 100.3 80.3 SNL U.S. Natural Gas Next-Day Prices ($ per mmBtu) Hub Current Day Prior Day Henry Hub <NG-W-HH-SNL> 5.72 5.10 Transco Z6 New York <NG-CG-NY-SNL> 5.23 4.46 PG&E Citygate <NG-CG-PGE-SNL> 7.39 6.78 Dominion South <NG-PCN-APP-SNL> 5.22 4.40 Chicago Citygate <NG-CG-CH-SNL> 5.64 4.97 Algonquin Citygate <NG-CG-BS-SNL> 5.69 4.58 SoCal Citygate <NG-SCL-CGT-SNL> 6.52 5.69 Waha Hub <NG-WAH-WTX-SNL> 5.43 4.75 SNL U.S. Power Next-Day Prices ($ per megawatt-hour) Hub Current Day Prior Day New England <EL-PK-NPMS-SNL> 65.75 53.25 PJM West <EL-PK-PJMW-SNL> 50.75 56.24 Ercot North <EL-PK-ERTN-SNL> 53.21 92.06 Mid C <EL-PK-MIDC-SNL> 58.25 51.50 Palo Verde <EL-PK-PLVD-SNL> 53.75 43.50 SP-15 <EL-PK-SP15-SNL> 53.75 42.25 (Reporting by Scott DiSavino; Editing by Shailesh Kuber)

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