NEW YORK: US natural gas futures fell about 6% to a three-week low on Friday as global gas prices collapsed, a US contract expired and on record US output, rising Canadian exports and forecasts for milder US weather and lower demand next week including the US Memorial Day holiday on Monday.
Prices declined despite a lack of wind power in recent weeks that forced power generators to burn more gas to produce electricity, reducing the gas put in storage.
The amount of US power generated by wind dropped to 7% of the total so far this week versus a high of 17% during the week ended April 21, according to federal energy data. The amount of power generated by gas averaged 41% so far this week, up from a low of 37% during the windy week ended April 21.
On its last day as the front month, gas futures for June delivery on the New York Mercantile Exchange fell 12.6 cents, or 5.5%, to settle at $2.181 per million British thermal units (mmBtu), their lowest close since May 5.
“Final settlement day bolsters volatility risks as liquidity thins for the expiring front-month contract, with eight of the last ten expiration days posting a price move of 10 (cents) or more. Contract settlement into Memorial Day weekend further enhance short-term risks,” analysts at energy advisory EBB Analytics said in a note.
Only about 2,173 front-month contracts traded on Friday versus a daily average of over 130,000 since the start of the year.
Futures for July, which will soon be the front month, were down about 6 cents to $2.417 per mmBtu.
For the week, the front-month was down about 16%, which would erase last week’s 14% gain. In the spot market, mild weather and ample hydropower in the US West pressured next-day gas prices for Friday at the PG&E Citygate in Northern California to $2.80 per mmBtu, their lowest since August 2020 for a second day in a row.
Data provider Refinitiv said average gas output in the US Lower 48 states rose to 101.5 billion cubic feet per day (bcfd) so far in May, which would top April’s monthly record of 101.4 bcfd.
As firefighters make significant progress in tackling wildfires in Alberta, the amount of gas exported from Canada to the US was on track to hold around 8.0 bcfd for a fourth day in a row on Friday, according to Refinitiv, up from an average of 7.0 bcfd from May 6-22 when some fires were still raging out of control.
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