US natural gas futures fell on Friday from a 10-week high on forecasts for demand and exports to decline because of government lockdowns to stop the spread of the novel coronavirus.
The declines occurred despite a continued drop in output as drillers shut oil wells in shale basins due to the collapse in crude prices. Those oil wells also produce a lot of gas. US crude futures are down about 70% since the start of the year.
Front-month gas futures for June delivery on the New York Mercantile Exchange fell 5.9 cents, or 3.0%, to settle at $1.890 per million British thermal units. On Thursday, the front-month closed at its lowest since Feb. 19.
For the week, however, the contract gained about 8% after falling less than 1% last week.
Looking ahead, gas futures for the balance of 2020 and calendar 2021 were trading higher than the front-month on expectations demand will jump once governments loosen travel and work restrictions.
The US Energy Information Administration (EIA) projected gas production will fall to an annual average of 91.7 billion cubic feet per day in 2020 and 87.5 bcfd in 2021 from a record 92.2 bcfd in 2019 as drillers shut wells and cut spending.
Data provider Refinitiv said average gas output in the US Lower 48 states fell to an eight-month low of 92.7 bcfd in April, down from 93.2 bcfd in March and an all-time monthly high of 95.4 bcfd in November.
The EIA projected coronavirus lockdowns will cut US gas use - not including exports - to an average of 83.8 bcfd in 2020 and 81.2 bcfd in 2021 from a record 85.0 bcfd in 2019.
With many businesses shut due to the coronavirus and milder spring weather coming, Refinitiv projected demand in the Lower 48 states, including exports, would drop from an average of 86.4 bcfd this week to 79.5 bcfd next week before rising to 82.8 bcfd in two weeks. That compares with Refinitiv's forecasts on Thursday of 86.2 bcfd this week and 85.0 bcfd next week.
Even though the coronavirus is cutting gas use worldwide, EIA still expects US exports to hit record highs in coming years as more liquefied natural gas (LNG) export plants and pipelines enter service.
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