U.S. natural gas futures slipped to a fresh one-week low on Tuesday on forecasts mild weather will decrease air conditioning demand over the next week by more than previously expected.
Traders noted U.S. prices fell even though gas in Europe and Asia continued to hit fresh record highs over $25 per million British thermal units (mmBtu) versus just about $5 for the U.S. fuel, prompting buyers around the world to keep purchasing all the liquefied natural gas (LNG) the United States can produce.
Global prices are high due to Asia's insatiable demand for gas and as Europe scrambles to refill stockpiles ahead of the winter heating season, when demand for the fuel peaks. The problem is that the United States is already producing as much LNG as it can.
The amount of gas flowing to U.S. LNG export plants slipped to an average of 10.4 billion cubic feet per day (bcfd) so far in September, down from 10.5 bcfd in August, according to data provider Refinitiv. That compares with a monthly record of 11.5 bcfd in April.
Traders said U.S. LNG exports were reduced this month by a brief shutdown at Freeport LNG's plant in Texas during Tropical Storm Nicholas and the start of maintenance at Berkshire Hathaway Energy's Cove Point in Maryland on Monday.
Front-month gas futures fell 3.1 cents, or 0.6%, to $4.954 per mmBtu at 7:54 a.m. EDT (1154 GMT), putting the contract on track for its lowest close since Sept. 10 for a third day in a row.
Since hitting a seven-year high last week, the front-month has dropped about 10% over the past four days on growing expectations the United States will have enough gas in storage for its winter heating season. If it holds, that would be the longest losing streak for the front-month since May.
U.S. gas stockpiles were about 7.1% below their five-year normal for this time of year.
Refinitiv said gas output in the U.S. Lower 48 states fell to an average of 90.6 bcfd so far in September, down from 92.0 bcfd in August, due mostly to Ida-related losses along the Gulf Coast. That compares with a monthly record high of 95.4 bcfd in November 2019.
About 0.6 bcfd, or 27%, of gas production in the U.S. Gulf of Mexico remained shut-in since Ida hit Louisiana on Aug. 29, according to government data on Friday.
With the coming of milder weather, Refinitiv projected average U.S. gas demand, including exports, would fall from 86.3 bcfd this week to 83.5 bcfd next week as air conditioning use declines. This week's forecast was lower than Refinitiv expected on Monday.
(Reporting by Scott DiSavino; Editing by Steve Orlofsky) ((scott.disavino@thomsonreuters.com; +1 332 219 1922; Reuters Messaging: scott.disavino.thomsonreuters.com@reuters.net))
