US natural gas futures fell on Wednesday after hitting technical resistance on forecasts for warmer weather and lower heating use next week than previously expected and the return of inventories to normal levels for the first time in over two years. Front-month gas futures for November delivery on the New York Mercantile Exchange fell 3.6 cents, or 1.5%, to settle at $2.303 per million British thermal units (mmBtu).
The contract rose as high as $2.384 per mmBtu on Wednesday, but fell after failing to take out a key level of technical resistance at $2.40, traders said. That high for the day put the contract up about 8% over last week's close on forecasts for more cold weather and higher heating demand in late October and November.
Recent price swings in gas futures pushed at-the-money implied volatility, a determinant of option premiums, to 50.4% on Friday, its highest since January. Over the past year, implied volatility has swung wildly, hitting a record high of 117.5% in November and a record low of 18.6% in April.
Over the next six to 10 days, the US National Weather Service (NWS) forecast temperatures in the Lower 48 US states would be warmer than usual east of the Mississippi River and cooler than normal over the Rocky Mountains. That cold is expected to shift to the eastern half of the country over the 8-14 day period, with warmer temperatures moving into the Southwest, the NWS said.
Refinitiv projected average gas demand in the Lower 48 states, including exports, would only reach 84.6 billion cubic feet per day (bcfd) next week as moderate weather reduces heating use, down from its previous forecast of 85.1 bcfd on Tuesday. That compares with an average of 86.0 bcfd during this week's cooler weather.
Gas flows to liquefied natural gas (LNG) export plants eased to 6.6 bcfd on Tuesday due to the shutdown of one liquefaction train at Cheniere Energy Inc's Corpus Christi terminal in Texas, down from a record 7.0 bcfd on Monday after Dominion Energy Inc's Cove Point terminal in Maryland returned to service. That compares with an average of 6.3 bcfd last week.
Separately, the Gemmata LNG vessel left Kinder Morgan Inc's Elba Island LNG export facility in Georgia and is heading to Trinidad. The vessel arrived nearly full of LNG (94% of maximum draft) from Trinidad, its prior stop, and left with less LNG (81% of maximum draft), according to data from Refinitiv.
The first liquefaction train at Elba terminal entered service on October 4. It is common for LNG export facilities to receive LNG to cool their storage tanks and other equipment at startup. In addition, there is also an LNG import plant at Elba. Officials at Kinder Morgan were only able to say the vessel was docked at the facility. Officials at Royal Dutch Shell Plc, which controls the movement of gas into and out of the export facility, would not comment on what Gemmata was doing.
Pipeline flows to Mexico slipped to 5.1 bcfd on Tuesday from 5.3 bcfd on Monday, according to Refinitiv data. That compares with an average of 5.5 bcfd last week and an all-time daily high of 5.9 bcfd on September 18. Analysts forecast utilities added 106 billion cubic feet (bcf) of gas to storage during the week ended October 11. That compares with an injection of 82 bcf during the same week last year and a five-year (2014-18) average build of 81 bcf for the period. If correct, the increase would boost stockpiles to 3.521 trillion cubic feet (tcf), topping the five-year average of 3.505 tcf for the first time since September 2017.
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