US natgas futures edge up from 7-week low on near-record LNG exports

US natural gas futures edged up on Tuesday from a seven-week low in the prior session on near-record liquefied natural gas (LNG) exports and expectations that low prices would prompt power generators to burn more gas and less coal to produce electricity in coming weeks.

That small price increase occurred despite forecasts for milder weather through the end of March than previously expected.

Front-month gas futures were up 1.4 cents, or 0.6%, to $2.498 per million British thermal units at 9:06 a.m. EDT (1306 GMT). On Monday, the contract closed at its lowest level since Jan. 22.

Traders noted prices were down because low demand and rising output could cut weekly storage withdrawals to near zero this week. That would fall well below the five-year (2016-2020) average decrease for the week ended March 19 of 51 billion cubic feet.

With many analysts now projecting stockpiles will end the heating season near normal levels, futures for the balance of 2021 and calendar 2022 have declined to their lowest levels since January. That caused the premium of March 2022 futures over April 2022, a spread used to bet on winter weather, to drop to its lowest since April 2020.

The gas industry calls the March-April spread the "widow maker" because rapid price moves resulting from changing weather forecasts have knocked some speculators out of business, including the Amaranth hedge fund, which lost over $6 billion on gas futures in 2006.

Data provider Refinitiv said output in the Lower 48 US states averaged 90.9 billion cubic feet per day (bcfd) so far in March, up sharply from a 28-month low of 86.5 bcfd in February when extreme weather froze gas wells and pipes in Texas. That was still much lower than the all-time monthly high of 95.4 bcfd in November 2019.

Refinitiv projected average gas demand, including exports, would fall from 102.9 bcfd this week to 100.1 bcfd next week as the weather turns milder. The demand forecast for next week, however, was higher than Refinitiv's estimate on Monday due to rising power generator usage.

The amount of gas flowing to US LNG export plants, meanwhile, has averaged 10.4 bcfd so far in March. That compares with a four-month low of 8.5 bcfd in February, as extreme cold cut power and gas supplies to the facilities, and a monthly record high of 10.7 bcfd in December.

On a daily basis, feedgas to LNG export plants was on track to rise to 11.2 bcfd, its highest since hitting a daily record of 11.3 bcfd in mid-December, according to Refinitiv data.