US natural gas futures slip

NEW YORK: US natural gas futures fell about 5% to a seven-week low on Tuesday on forecasts for mild weather through at least mid-November and an increase in output over most of the past several days.

On the last day as the front-month, gas futures for November delivery on the New York Mercantile Exchange fell 10.8 cents, or 4.7%, to $2.201 per million British thermal units (mmBtu) by 8:18 a.m. EDT (1218 GMT), putting the contract on track for its lowest close since Sept. 9.

Futures for December, which will soon be the front-month, were down about five cents to $2.81 per mmBtu, putting the premium of December over November on track for a record high of 61 cents per mmBtu.

With mild weather squeezing demand and output mostly rising, analysts projected utilities likely injected more gas into storage than normal last week for a second week in a row for the first time since October 2023. There was about 5% more gas in storage than normal for this time of year.

Prior to last week, injections had been smaller than usual for 14 weeks in a row because many producers have reduced drilling activities so far this year after average spot monthly prices at the US Henry Hub benchmark in Louisiana fell to a 32-year low in March. Prices have remained relatively low since then.

In the spot market, pipeline constraints caused next-day gas prices at the Waha hub in the Permian Shale in West Texas to remain in negative territory for a record 40th time this year.

Financial group LSEG said average gas output in the Lower 48 US states slipped to 101.7 billion cubic feet per day (bcfd) so far in October, down from 101.8 bcfd in September. That compares with a record 105.5 bcfd in December 2023.

On a daily basis, output was on track to drop by 1.0 bcfd to a preliminary four-day low of 102.2 bcfd on Tuesday after climbing about 2.1 bcfd over the prior five days to a preliminary eight-week high of 103.2 bcfd on Monday. Analysts have noted that preliminary data is often revised later in the day.

Meteorologists projected the weather in the Lower 48 states would remain mostly warmer than normal through at least Nov. 13. But even warmer than normal weather in early November is cooler than warmer than normal weather in late October.

With seasonally cooler coming, LSEG forecast average gas demand in the Lower 48, including exports, would rise from 99.3 bcfd this week to 102.1 bcfd next week.