U.S. natgas slides on mild weather forecasts, lower demand

U.S. natural gas futures slipped to a near four-week low on Tuesday

  
Oct 19 (Reuters) - U.S. natural gas futures slipped to a near four-week low on Tuesday on forecasts for milder than normal weather and lower than usual heating demand through early November.

That price decline came as the market takes a break after collapsing 8% on Monday despite an intraday price spike in European gas of over 10% after Russian gas giant Gazprom failed to book much pipeline capacity to send additional fuel to Europe. That means Europe will remain reliant on other sources of gas - like U.S. liquefied natural gas (LNG) - to refill dangerously low stockpiles before the winter heating season.

In recent weeks, U.S. gas futures have mostly risen in lockstep with the spike in global gas prices. Overseas gas prices soared to record highs as utilities in Europe and Asia scramble to refill inventories. U.S. prices jumped to their highest since 2008 a couple weeks go as competition for U.S. LNG remains strong.

But no matter how high global prices rise, U.S. LNG export plants were already operating near full capacity and will not be able to produce more LNG until later in the year.

And U.S. gas inventories, unlike those in Europe, were in good shape for the winter with more than enough fuel available for the upcoming heating season.

Analysts expect U.S. gas inventories will top 3.5 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.

In Europe, analysts say stockpiles are about 15% below normal for this time of year.

Front-month gas futures fell 6.1 cents, or 1.2%, to $4.928 per million British thermal units (mmBtu) at 8:24 a.m. EDT (1224 GMT), putting the contract on track for its lowest close since Sept. 22.

Data provider Refinitiv said gas output in the U.S. Lower 48 states rose to an average of 92.0 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.

Even though the weather is milder than normal, it is still turning seasonally cooler. Refinitiv projected average U.S. gas demand, including exports, would rise from 85.9 bcfd this week to 88.5 bcfd next week as more homes and businesses turn on their heaters. Those forecasts were lower than Refinitiv expected on Monday.

With gas prices near $31 per mmBtu in Europe and $34 in Asia , versus just around $5 in the United States, traders said buyers around the world will keep purchasing all the LNG the United States could produce.

Refinitiv said the amount of gas flowing to U.S. LNG export plants averaged 10.4 bcfd so far in October, the same as in September, but was expected to rise in coming weeks as more liquefaction trains exit maintenance outages.

But the United States only has capacity to turn 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 15 Oct 8 Oct 15 average

(Forecast) (Actual) Oct 15 U.S. weekly natgas storage change (bcf): 94 81 49 69 U.S. total natgas in storage (bcf): 3,463 3,369 3,919 3,612 U.S. total storage versus 5-year average -4.1% -4.9%

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 5.31 4.98 2.84 2.13 2.66 Title Transfer Facility (TTF) 31.44 30.79 4.89 3.24 5.19 Japan Korea Marker (JKM) 34.34 34.24 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 133 134 186 128 173 U.S. GFS CDDs 36 34 39 44 30 U.S. GFS TDDs 169 168 225 172 203

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 92.2 91.8 92.1 90.0 83.1 U.S. Imports from Canada 7.3 7.4 7.2 6.6 7.5 U.S. LNG Imports 0.0 0.0 0.0 0.0 0.1 Total U.S. Supply 99.5 99.2 99.3 96.6 90.7

U.S. Demand (bcfd) U.S. Exports to Canada 2.4 2.0 2.1 2.3 2.0 U.S. Exports to Mexico 5.8 6.0 5.8 6.2 5.0 U.S. LNG Exports 10.6 10.8 10.8 8.1 3.7 U.S. Commercial 5.3 6.4 7.3 7.1 6.8 U.S. Residential 5.0 7.2 9.3 8.1 7.2 U.S. Power Plant 28.8 25.6 25.3 29.1 27.7 U.S. Industrial 20.8 21.3 21.4 22.6 21.6 U.S. Plant Fuel 4.6 4.5 4.5 4.5 4.5 U.S. Pipe Distribution 1.8 1.8 1.9 1.8 1.7 U.S. Vehicle Fuel 0.1 0.1 0.1 0.1 0.1 Total U.S. Consumption 66.4 67.1 69.8 73.3 69.6 Total U.S. Demand 85.2 85.9 88.5 89.9 80.3

SNL U.S. Natural Gas Next-Day Prices ($ per mmBtu) Hub Current Day Prior Day Henry Hub 5.01 5.44 Transco Z6 New York 4.47 4.60 PG&E Citygate 6.70 6.82 Dominion South 4.39 4.56 Chicago Citygate 4.82 5.03 Algonquin Citygate 4.87 5.30 SoCal Citygate 6.71 5.66 Waha Hub 4.57 4.86

SNL U.S. Power Next-Day Prices ($ per megawatt-hour) Hub Current Day Prior Day New England 59.00 73.50 PJM West 47.25 54.52 Ercot North 43.50 48.50 Mid C 75.25 64.25 Palo Verde 62.75 37.50 SP-15 61.75 50.25

(Reporting by Scott DiSavino Editing by Nick Zieminski) ((scott.disavino@thomsonreuters.com; +1 332 219 1922; Reuters Messaging: scott.disavino.thomsonreuters.com@reuters.net))

((For Refinitiv type ENERGY in Eikon search bar and then go to the GAS dropdown and the NORTH AMERICA dropdown or see: cpurl://apps.cp./cms/pageid=usa-gas For Interactive Map, type 'Interactive Map' in the box at upper left of the Reuters Eikon terminal. For graphics on Baker Hughes rig counts, see: For next-day SNL U.S. gas prices, see: For next-day SNL U.S. power prices, see: For U.S. natgas price and storage polls, see: For U.S. nuclear power outages, see: For U.S. Northwest hydro power report, see: For U.S./Canada natural gas rig count vs Henry Hub futures price, see: For the U.S. natural gas speed guide, see: For the U.S. power speed guide, see: To determine CFTC managed money net position add (NYMEX Henry Hub options and futures combined ) plus (ICE Henry Hub options and futures combined divided by four) plus (NYMEX Henry Hub swaps options and futures combined divided by four) plus (NYMEX Henry Hub penultimate gas swaps divided by four) NYMEX Henry Hub options and futures combined NYMEX Henry Hub futures only ICE Henry Hub options and futures combined NYMEX Henry Hub swaps options and futures combined NYMEX Henry Hub Penultimate gas swaps ))


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