US natural gas futures slipped to a fresh three-week low on Tuesday as production rose to an all-time high and the latest weather forecasts confirmed an earlier outlook calling for near normal temperatures through early December.
After dropping around 4.5% on Monday on moderating weather forecasts, front-month gas futures for December delivery on the New York Mercantile Exchange were down 2.8 cents, or 1.1%, to $2.538 per million British thermal units at 8:04 a.m. EST (1304 GMT). If the contract closes at its current level, it would be the lowest settle since October 28.
Monday's big decline pressured futures for calendar 2020 below calendar 2021 for the first time since the end of October.
Data provider Refinitiv said gas production in the Lower 48 US states rose to a record high 95.2 billion cubic feet per day (bcfd) on Monday from 95.1 bcfd on Sunday. That compares with an average of 94.7 bcfd last week.
Refinitiv projected average gas demand in the Lower 48 states, including exports, would rise from 107.1 billion cubic feet per day (bcfd) this week to 110.2 bcfd next week due to a seasonal cooling.
That is similar to Refinitiv's predictions on Monday of 106.9 bcfd for this week and 110.0 bcfd for next week.
Gas flows to liquefied natural gas (LNG) export plants held at 7.3 bcfd for a second day in a row on Monday, according to Refinitiv data. That compares with an average of 7.0 bcfd last week and an all-time daily high of 7.7 bcfd on November 2.
Pipeline flows to Mexico rose to 5.3 bcfd on Monday from 5.2 bcfd on Sunday, according to Refinitiv data. That compares with an average of 5.6 bcfd last week and an all-time daily high of 6.2 bcfd on September 18.
Analysts said utilities likely pulled 79 billion cubic feet (bcf) of gas from storage during the week ended Nov. 15, their first withdrawal of the November-March heating season.
That reduction compares with a withdrawal of 109 bcf during the same week last year and a five-year (2014-18) average decline of 32 bcf for the period.
If correct, the decrease would cut stockpiles to 3.653 trillion cubic feet (tcf), 1.2% below the five-year average of 3.698 tcf for this time of year, erasing the small storage surplus built up over the prior five weeks. Earlier this year, in March, the amount of gas in inventory was as much as 33% below the five-year average. But record production has allowed utilities to inject 2.569 tcf into storage since April 1, turning that big deficit into a small surplus during the week ended October 11. So long as the weather moderates in late November as expected, analysts said stockpiles will likely return to a surplus over the five-year average during the next month or so as rising production enables utilities to leave gas in storage.
In the spot market, next-day gas for Tuesday at the Southern California citygate rose to its highest since March.
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