EQT

US natgas prices fall 4% on forecasts for milder weather, lower demand

Credit: REUTERS/ANGUS MORDANT

By Scott DiSavino

March 27 (Reuters) - U.S. natural gas futures fell about 4% on Wednesday on forecasts for milder weather and less heating demand next week than previously expected.

Also weighing on prices were ample amounts of gas in storage and low amounts flowing to liquefied natural gas (LNG) export plants due to ongoing work at Freeport LNG's export plant in Texas.

On its first day as the front-month, gas futures NGc1 for May delivery on the New York Mercantile Exchange fell 7.0 cents, or 3.9%, to settle at $1.718 per million British thermal units (mmBtu).

Even though that price was down from where the May contract closed on Tuesday, it was up about 9% from where the April contract closed when it was still the front-month. On Tuesday, the front-month April contract closed at its lowest since June 2020.

On March 26, intraday gas prices fell to $1.481 per mmBtu, their lowest since June 2020 after a mild winter with record output allowed utilities to leave significantly more gas in storage than usual for this time of year. Analysts estimated current gas stockpiles were around 41% above normal levels. EIA/GASNGAS/POLL

Those low prices should boost U.S. gas use to a record high in 2024, but cut production for the first time since 2020 when the COVID-19 pandemic destroyed demand for the fuel, according to the U.S. Energy Information Administration's latest outlook.

Output was already down by around 3% over the past month as several energy firms, including EQTEQT.N and Chesapeake EnergyCHK.O, delayed well completions and cut back on other drilling activities.

EQT is currently the biggest U.S. gas producer and Chesapeake will soon become the biggest producer after its merger with Southwestern EnergySWN.N.

SUPPLY AND DEMAND

Financial firm LSEG said gas output in the Lower 48 U.S. states fell to an average of 100.2 billion cubic feet per day (bcfd) so far in March, down from 104.1 bcfd in February. That compares with a monthly record high of 105.5 bcfd in December 2023.

On a daily basis, output was on track to drop by about 3.0 bcfd over the past three days to a preliminary two-month low of 97.6 bcfd on Wednesday, according to LSEG data. Analysts said that output decline was due in part to extreme cold in North Dakota and some Rocky Mountain states over the past few days that froze some oil and gas wells.

For a month or so, traders have said that low gas prices should allow more gas power plants to displace coal plants.

But analysts at EBW Analytics Group said U.S. coal prices could decline in the coming weeks after the collapse of the Francis Scott Key Bridge in Baltimore limited coal exports, leaving more of the black rock in the country, and as U.S. power generators keep burning down their higher-than-usual coal inventories after a mild winter. Gas plants will not displace coal plants if coal is the cheaper fuel.

Baltimore is the second-biggest coal export port in the U.S.

Meteorologists projected weather across the Lower 48 would remain mostly warmer than normal through April 11.

With seasonally warmer weather coming, LSEG forecast gas demand in the Lower 48, including exports, would fall from 112.3 bcfd this week to 105.0 bcfd next week. The forecast for next week was lower than LSEG's outlook on Tuesday.

Week ended Mar 22 Forecast

Week ended Mar 15 Actual

Year ago Mar 15

Five-year average

Mar 15

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

-33

+7

-55

-27

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

2,299

2,332

1,866

1,627

U.S. total storage versus 5-year average

41.3%

41.0%

Global Gas Benchmark Futures ($ per mmBtu)

Current Day

Prior Day

This Month Last Year

Prior Year Average 2023

Five Year Average (2018-2022)

Henry Hub NGc1

1.76

1.79

2.41

2.66

3.60

Title Transfer Facility (TTF) TRNLTTFMc1

8.63

8.74

13.72

13.04

14.39

Japan Korea Marker (JKM) JKMc1

9.58

9.72

13.59

14.39

14.31

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

188

212

229

219

207

U.S. GFS CDDs

17

15

29

24

22

U.S. GFS TDDs

205

227

258

243

229

LSEG U.S. Weekly GFS Supply and Demand Forecasts

Prior Week

Current Week

Next Week

This Week Last Year

Five-Year (2019-2023) Average For Month

U.S. Supply (bcfd)

U.S. Lower 48 Dry Production

100.2

99.6

99.8

102.3

95.1

U.S. Imports from Canada

7.5

7.7

8.0

7.8

8.4

U.S. LNG Imports

0.0

0.0

0.0

0.0

0.1

Total U.S. Supply

107.7

107.3

107.7

110.1

103.6

U.S. Demand (bcfd)

U.S. Exports to Canada

3.7

3.4

3.4

2.8

3.0

U.S. Exports to Mexico

6.0

6.2

6.3

5.6

5.4

U.S. LNG Exports

13.0

12.8

12.7

13.1

9.2

U.S. Commercial

11.5

11.6

9.5

11.5

12.3

U.S. Residential

16.9

17.5

13.6

17.7

19.4

U.S. Power Plant

30.5

29.0

28.6

29.8

23.8

U.S. Industrial

24.4

24.3

23.5

23.8

26.8

U.S. Plant Fuel

4.9

4.9

4.9

4.9

5.0

U.S. Pipe Distribution

2.4

2.4

2.2

2.4

2.3

U.S. Vehicle Fuel

0.1

0.1

0.1

0.1

0.1

Total U.S. Consumption

90.8

89.8

82.5

90.2

89.7

Total U.S. Demand

113.5

112.3

105.0

111.7

107.3

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

80

80

83

107

81

Jan-Jul

81

81

77

102

79

Oct-Sep

82

82

76

103

81

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

Week ended Mar 29

Week ended Mar 22

Week ended Mar 15

Week ended Mar 8

Week ended Mar 1

Wind

18

13

15

15

14

Solar

4

5

5

4

4

Hydro

7

8

8

7

7

Other

1

1

1

1

1

Petroleum

Natural Gas

36

40

38

39

38

Coal

13

13

12

13

16

Nuclear

20

20

21

21

21

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

Hub

Current Day

Prior Day

Henry Hub NG-W-HH-SNL

1.48

1.46

Transco Z6 New York NG-CG-NY-SNL

1.44

1.58

PG&E Citygate NG-CG-PGE-SNL

2.36

2.27

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

1.37

1.39

Chicago Citygate NG-CG-CH-SNL

1.44

1.37

Algonquin Citygate NG-CG-BS-SNL

1.58

1.66

SoCal Citygate NG-SCL-CGT-SNL

1.58

1.57

Waha Hub NG-WAH-WTX-SNL

0.38

0.20

AECO NG-ASH-ALB-SNL

1.22

1.15

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

Hub

Current Day

Prior Day

New England EL-PK-NPMS-SNL

31.50

32.25

PJM West EL-PK-PJMW-SNL

31.00

32.50

Ercot North EL-PK-ERTN-SNL

19.00

28.25

Mid C EL-PK-MIDC-SNL

29.50

29.50

Palo Verde EL-PK-PLVD-SNL

-8.00

-8.00

SP-15 EL-PK-SP15-SNL

3.75

3.75

(Reporting by Scott DiSavino; Editing by Paul Simao, Kirsten Donovan)

((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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