U.S. natural gas futures slip to 1-month low on record output, mild weather

• "People are still rattled from last week's larger-than-market-expectation storage injection and that is translating into continued selling,"
• U.S. natural gas futures dropped to one-month low on Tuesday, weighed down by record production and forecasts for the weather to moderate over the next two weeks.

U.S. natural gas futures dropped to one-month low on Tuesday, weighed down by record production and forecasts for the weather to moderate over the next two weeks.

Gas futures for November delivery on the New York Mercantile Exchange fell 3.5 cents, or 1.5%, to $2.295 per million British thermal units (mmBtu) by 09:57 a.m. EDT (1357 GMT) after touching their lowest since Sept. 3 at $2.282. That put the front-month on track for an 11th straight session of falls.

Gas output in the Lower 48 states has averaged a near record high of 92.8 billion cubic feet per day (bcfd) in the past 30 days.

On a daily basis, production scaled an all-time high of 93.8 bcfd on Sunday, according to Refinitiv data.

"People are still rattled from last week's larger-than-market-expectation storage injection and that is translating into continued selling," said Robert DiDona of Energy Ventures Analysis.

A more seasonal weather pattern is expected and production gains are weighing on the market, he added.

The U.S. Energy Information Administration (EIA) said utilities added 102 bcf of gas to storage during the week ended Sept. 20 verses 89-bcf build that analysts forecast in a Reuters poll.

Meanwhile, analysts said utilities likely added 105 bcf of gas to storage during the week ended Sept. 27.

That compares with an injection of 91 bcf during the same week last year and a five-year (2014-18) average build of 83 bcf for the period.

The amount of gas in inventory has remained below the five-year average since September 2017.

It fell as much as 33% below that in March 2019. But with production hitting record highs, analysts said stockpiles should reach a near-normal 3.7 tcf by the end of summer injection season on Oct. 31.

"The weather factor has subsided considerably as a source of support while latest EIA storage has reinforced our prior view that cooling degree days accumulation at this time of the year can be quite modest even when the weather forecasts are favoring much above normal temperatures," Jim Ritterbusch, president of Ritterbusch and Associates, said in a note.

Despite the mostly warmer weather, temperatures are still easing with the coming of autumn.

Data provider Refinitiv projected gas demand in the lower 48 U.S. states would fall to an average of 82.5 bcfd next week from an average around 85.1 bcfd forecast this week.

Those demand forecasts include exports, which analysts said would likely rise as more gas flows to LNG export plants and pipelines to Mexico.