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US natgas prices ease 1% on record output and ample storage

Credit: REUTERS/DADO RUVIC

By Scott DiSavino

NEW YORK, Nov 14 (Reuters) - U.S. natural gas futures eased about 1% as record output should allow utilities to keep injecting gas into storage through at least late November.

That price decline came despite forecasts for heating demand to rise as the weather turns colder during the U.S. Thanksgiving Day holiday week and as record amounts of gas flows to U.S. liquefied natural gas (LNG) export plants.

Utilities usually start pulling gas out of storage to meet heating demand in mid November.

Analysts forecast utilities pulled about 7 billion cubic feet (bcf) of gas out of storage during the week ended Nov. 3, which was colder than normal. If correct, that would be the first withdrawal of the 2023-2024 winter season.

But with the return of milder weather during the week ended Nov. 10, analysts forecast utilities injected about 45 bcf of gas back into storage and could keep injecting gas into storage during the weeks ended Nov. 17 and 24 if output remains at record highs.

The U.S. Energy Information Administration (EIA) did not release its weekly gas storage report last week due to a planned systems upgrade. EIA said it will resume its regular schedule this week. EIA/GASNGAS/POLL

Front-month gas futures NGc1 for December delivery on the New York Mercantile Exchange fell 4.2 cents, or 1.3%, to $3.155 per million British thermal units (mmBtu) at 9:07 a.m. EST (1407 GMT). On Monday, the contract closed at its highest since Nov. 6.

With the front-month down about 14% last week, speculators cut their net long futures and options positions on the New York Mercantile and Intercontinental Exchanges to the lowest since mid October, according to the U.S. Commodity Futures Trading Commission's Commitments of Traders report.

One bearish factor that has weighed on the futures market for much of this year has been lower spot or next-day prices at the Henry Hub benchmark NG-W-HH-SNL in Louisiana.

The spot market traded below front-month futures for 181 out of 217 trading days so far this year, according to data from financial firm LSEG. Next-day prices for Tuesday at the Henry Hub were up about 4% to $2.61 per mmBtu.

Analysts have said that so long as the futures market stays in contango - with prices in the second-month higher than the front-month - and spot prices remain far enough below the front-month to cover margin and storage costs, traders should be able to lock in arbitrage profits by buying spot gas, storing it and selling a futures contract.

SUPPLY AND DEMAND

LSEG said average gas output in the Lower 48 U.S. states rose to 107.3 billion cubic feet per day (bcfd) so far in November, up from a record 104.2 bcfd in October.

Meteorologists projected the weather would remain warmer than normal through Nov. 19 before turning near to colder than normal from Nov. 20-29.

With colder weather coming, LSEG forecast U.S. gas demand in the Lower 48 states, including exports, would rise from 111.2 bcfd this week to 114.7 bcfd next week. The forecast for next week was higher than Refinitiv's outlook on Monday.

Gas flows to the seven big U.S. LNG export plants rose to an average of 14.1 bcfd so far in November, up from 13.7 bcfd in October and a monthly record of 14.0 bcfd in April.

That increase came even though the amount of gas flowing to Freeport LNG's export plant in Texas dropped by 1.9 bcfd to just 0.1 bcfd on Monday. Feedgas to Freeport, however, was on track to jump to 1.8 bcfd on Tuesday.

On Sunday, total U.S. LNG feedgas rose to an all-time high of 14.91 bcfd, topping the prior record of 14.90 bcfd on April 13.

Week ended Nov 10 Forecast

Week ended Nov 3 Forecast

Year ago Nov 10

Five-year average

Nov 10

U.S. weekly natgas storage change (bcf):

+45

-7

+66

+20

U.S. total natgas in storage (bcf):

3,817

3,772

3,635

3,630

U.S. total storage versus 5-year average

5.2%

4.5%

Global Gas Benchmark Futures ($ per mmBtu)

Current Day

Prior Day

This Month Last Year

Prior Year Average 2022

Five Year Average (2017-2021)

Henry Hub NGc1

3.21

3.20

6.43

6.54

2.89

Title Transfer Facility (TTF) TRNLTTFMc1

14.66

14.92

35.88

40.50

7.49

Japan Korea Marker (JKM) JKMc1

17.20

17.19

28.37

34.11

8.95

LSEG Heating (HDD), Cooling (CDD) and Total (TDD) Degree Days

Two-Week Total Forecast

Current Day

Prior Day

Prior Year

10-Year Norm

30-Year Norm

U.S. GFS HDDs

291

279

360

291

300

U.S. GFS CDDs

7

8

6

11

9

U.S. GFS TDDs

298

287

36

302

309

LSEG U.S. Weekly GFS Supply and Demand Forecasts

Prior Week

Current Week

Next Week

This Week Last Year

Five-Year Average For Month

U.S. Supply (bcfd)

U.S. Lower 48 Dry Production

107.1

107.9

108.1

101.5

94.4

U.S. Imports from Canada

7.6

8.4

8.1

9.6

8.3

U.S. LNG Imports

0.0

0.0

0.0

0.0

0.1

Total U.S. Supply

114.7

116.3

116.2

111.1

102.8

U.S. Demand (bcfd)

U.S. Exports to Canada

2.4

3.1

3.0

2.3

2.9

U.S. Exports to Mexico

6.1

6.1

6.2

5.1

5.3

U.S. LNG Exports

13.8

14.3

14.1

12.1

7.9

U.S. Commercial

8.9

10.7

12.5

15.3

11.7

U.S. Residential

12.1

15.7

19.3

25.1

17.5

U.S. Power Plant

28.7

30.4

27.6

32.7

27.5

U.S. Industrial

22.7

23.2

24.1

25.6

24.3

U.S. Plant Fuel

5.3

5.3

5.3

5.3

5.2

U.S. Pipe Distribution

2.1

2.3

2.4

2.1

2.3

U.S. Vehicle Fuel

0.1

0.1

0.1

0.1

0.1

Total U.S. Consumption

79.9

87.7

91.4

106.2

88.6

Total U.S. Demand

102.1

111.2

114.7

125.7

104.7

U.S. Northwest River Forecast Center (NWRFC) at The Dalles Dam

Current Day % of Normal Forecast

Prior Day % of Normal Forecast

2023

% of Normal Actual

2022 % of Normal Actual

2021 % of Normal Actual

Apr-Sep

92

93

83

107

81

Jan-Jul

88

88

77

102

79

Oct-Sep

89

89

76

103

81

U.S. weekly power generation percent by fuel - EIA

Week ended Nov 17

Week ended Nov 10

Week ended Nov 3

Week ended Oct 27

Week ended Oct 20

Wind

11

14

10

Solar

4

4

4

Hydro

5

5

5

Other

1

2

2

Petroleum

Natural Gas

40

40

42

Coal

19

16

17

Nuclear

19

19

20

SNL U.S. Natural Gas Next-Day Prices ($ per mmBtu)

Hub

Current Day

Prior Day

Henry Hub NG-W-HH-SNL

2.61

2.71

Transco Z6 New York NG-CG-NY-SNL

2.45

1.97

PG&E Citygate NG-CG-PGE-SNL

5.68

3.98

Eastern Gas (old Dominion South) NG-PCN-APP-SNL

2.04

1.81

Chicago Citygate NG-CG-CH-SNL

2.43

2.18

Algonquin Citygate NG-CG-BS-SNL

2.66

2.88

SoCal Citygate NG-SCL-CGT-SNL

5.62

5.90

Waha Hub NG-WAH-WTX-SNL

0.50

0.81

AECO NG-ASH-ALB-SNL

1.89

1.75

SNL U.S. Power Next-Day Prices ($ per megawatt-hour)

Hub

Current Day

Prior Day

New England EL-PK-NPMS-SNL

38.50

37.25

PJM West EL-PK-PJMW-SNL

42.25

44.25

Ercot North EL-PK-ERTN-SNL

58.75

43.00

Mid C EL-PK-MIDC-SNL

86.50

68.50

Palo Verde EL-PK-PLVD-SNL

55.50

40.00

SP-15 EL-PK-SP15-SNL

59.00

47.75

(Reporting by Scott DiSavino; Editing by Andrea Ricci)

((scott.disavino@thomsonreuters.com; +1 332 219 1922; Reuters Messaging: scott.disavino.thomsonreuters.com@reuters.net))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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