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U.S. natgas eases to 10-week low as demand drops on mild weather forecasts

·7 min read

Sept 23 (Reuters) - U.S. natural gas futures eased to a fresh 10-week low on Friday on expectations the weather will remain mild into early October, keeping both heating and cooling demand low and allowing utilities to inject lots of gas into storage over the next few weeks. That change in the weather after a brutally hot summer was also boosting the amount of wind power available, allowing generators to cut back on the amount of gas they burn to produce electricity. Another factor weighing on gas prices was the expectation that demand for the fuel would decline in October when the Cove Point liquefied natural gas (LNG) plant in Maryland shuts for a couple weeks of maintenance. Cove Point is consuming about 0.8 billion cubic feet per day (bcfd) of gas. U.S. gas use has already been reduced for months by the ongoing outage at the Freeport LNG export plant in Texas which has left more gas in the United States for utilities to inject into stockpiles for next winter. Freeport, the second-biggest U.S. LNG export plant, was consuming about 2 bcfd of gas before it shut on June 8. Freeport LNG expects the facility to return to at least partial service in early to mid-November. In Puerto Rico, meanwhile, an estimated 900,000 homes and businesses remain without power after Hurricane Fiona hit on Sunday. The U.S. National Hurricane Center (NHC) warned that Tropical Depression 9 would strengthen into a hurricane as it moves from the Caribbean Sea to the Gulf of Mexico over the next few days and hits South Florida on Wednesday. With much of the nation's gas production located away from the Gulf of Mexico in shale basins like the Permian in West Texas and Appalachia in Pennsylvania, analysts said tropical storms were more demand-destroying events since they knock out power and cause LNG export terminals to shut. Front-month gas futures on the New York Mercantile Exchange (NYMEX) fell 7.4 cents, or 1.0%, to $7.015 per million British thermal units (mmBtu) at 8:42 a.m. EDT (1242 GMT), putting the contract on track for its lowest close since July 14. That also kept the contract in technically oversold territory with a relative strength index (RSI) below 30 for a second day in a row. For the week, the contract was down about 10%, putting it on track for its fifth weekly decline in a row for the first time since January 2019 and its biggest weekly percentage decline since late June. Open interest in NYMEX futures , meanwhile, fell to its lowest level on Thursday since February 2016 as investors exited risky assets like commodities, worried the Federal Reserve will keep raising U.S. interest rates. Despite recent declines, gas futures were still up about 88% so far this year as higher prices in Europe and Asia keep demand for U.S. LNG exports strong. Global gas prices have soared due to supply disruptions and sanctions linked to Russia's Feb. 24 invasion of Ukraine. Gas was trading around $52 per mmBtu in Europe and $40 in Asia. Data provider Refinitiv said average gas output in the U.S. Lower 48 states rose to 98.7 bcfd so far in September from a record 98.0 bcfd in August. With cooler autumn weather coming, Refinitiv projected average U.S. gas demand, including exports, would slip from 92.4 bcfd this week to 91.4 bcfd next week and 88.7 bcfd in two weeks. The forecasts for next week was higher than Refinitiv's outlook on Thursday. The average amount of gas flowing to U.S. LNG export plants rose to 11.3 bcfd so far in September from 11.0 bcfd in August. That compares with a monthly record of 12.9 bcfd in March. The seven big U.S. export plants can turn about 13.8 bcfd of gas into LNG. Week ended Week ended Year ago Five-year Sep 23 Sep 16 Sep 23 average (Forecast) (Actual) Sep 23 U.S. weekly natgas storage change (bcf): +86 +103 +86 +77 U.S. total natgas in storage (bcf): 2,960 2,874 3,157 3,283 U.S. total storage versus 5-year average -9.8% -10.4% Global Gas Benchmark Futures ($ per mmBtu) Current Day Prior Day This Month Prior Year Five Year Last Year Average Average 2021 (2017-2021) Henry Hub 7.17 7.09 5.11 3.73 2.89 Title Transfer Facility (TTF) 53.11 53.91 22.61 16.04 7.49 Japan Korea Marker (JKM) 39.91 38.92 23.35 18.00 8.95 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 53 46 25 44 67 U.S. GFS CDDs 88 96 98 104 81 U.S. GFS TDDs 141 142 123 148 148 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 98.8 98.3 98.2 93.5 87.0 U.S. Imports from Canada 7.7 8.0 8.0 8.3 7.7 U.S. LNG Imports 0.0 0.0 0.0 0.0 0.1 Total U.S. Supply 106.5 106.2 106.2 101.8 95.8 U.S. Demand (bcfd) U.S. Exports to Canada 2.4 2.1 2.0 2.5 2.4 U.S. Exports to Mexico 5.5 5.5 5.6 5.9 5.3 U.S. LNG Exports 11.3 11.5 11.0 10.1 4.9 U.S. Commercial 4.7 4.8 5.4 4.9 4.9 U.S. Residential 3.7 3.9 5.0 4.2 3.9 U.S. Power Plant 37.1 36.4 33.7 31.5 33.2 U.S. Industrial 21.3 21.3 21.8 20.8 21.2 U.S. Plant Fuel 4.9 4.9 4.8 4.9 4.9 U.S. Pipe Distribution 2.0 1.9 1.9 1.9 2.1 U.S. Vehicle Fuel 0.1 0.1 0.1 0.1 0.1 Total U.S. Consumption 73.8 73.3 72.8 68.3 70.3 Total U.S. Demand 93.0 92.4 91.4 86.8 82.9 U.S. weekly power generation percent by fuel - EIA Week ended Week ended Week ended Week ended Week ended Sep 23 Sep 16 Sep 9 Sep 2 Aug 26 Wind 10 8 6 7 5 Solar 3 3 3 3 3 Hydro 5 5 6 5 6 Other 2 2 2 2 2 Petroleum 0 0 0 0 0 Natural Gas 41 42 45 44 44 Coal 19 19 21 21 22 Nuclear 19 19 18 17 18 SNL U.S. Natural Gas Next-Day Prices ($ per mmBtu) Hub Current Day Prior Day Henry Hub 7.76 7.99 Transco Z6 New York 5.50 6.00 PG&E Citygate 8.01 8.29 Dominion South 5.47 6.15 Chicago Citygate 6.38 6.80 Algonquin Citygate 5.85 6.45 SoCal Citygate 6.82 7.35 Waha Hub 4.88 6.63 AECO 4.25 3.58 SNL U.S. Power Next-Day Prices ($ per megawatt-hour) Hub Current Day Prior Day New England 63.00 76.25 PJM West 66.25 90.00 Ercot North 83.00 143.00 Mid C 59.25 63.00 Palo Verde 70.50 68.75 SP-15 72.25 69.50 (Reporting by Scott DiSavino; Editing by Andrea Ricci)