NEW YORK: US natural gas futures eased about 1% on Wednesday on signs producers started increasing output, forecasts for less demand next week than previously expected and worries about the large amount of surplus gas still in storage.
Analysts estimated there was about 29% more gas in storage than usual for this time of year.
Capping the price decline was an increase in the amount of gas flowing to liquefied natural gas (LNG) export plants this month, with flows to Freeport LNG’s plant in Texas up to an 11-month high.
Front-month gas futures for June delivery on the New York Mercantile Exchange fell 1.8 cents, or 0.7%, to $2.653 per million British thermal units (mmBtu) at 9:00 a.m. EDT (1300 GMT).
Despite the small price decline, the front-month remained in technically overbought territory for a 14th day in a row for the first time since June 2016.
In the spot market, next-day power at the Palo Verde hub in Arizona and South Path-15 (SP-15) in Southern California turned negative for the first time in two weeks.
US next-day power and gas prices have already turned negative several times in 2024, especially in Texas, Arizona and California. Prices at Palo Verde have averaged below zero 15 times so far this year versus just once in the past in 2019. SP-15 prices, which never averaged below zero before this year, have already hit that mark 12 times.
Negative prices signal there is too much power or gas being produced in a region. Energy firms can either reduce output, pay someone to take their power or gas, or, if they can get a permit, flare the unwanted gas.
Financial firm LSEG said gas output in the Lower 48 US states fell to an average of 97.3 billion cubic feet per day (bcfd) so far in May, down from 98.2 bcfd in April. That compares with a monthly record of 105.5 bcfd in December 2023.
On a daily basis, output was up about 0.7 bcfd since hitting a 15-week low of 96.2 bcfd on May 1. Energy traders said that increase was a sign the 63% gain in futures prices over the past three weeks has prompted some drillers to start producing more gas.
Meteorologists projected weather across the Lower 48 states would be warmer than normal from May 22-27 and then again from June 2-6 with a near normal stretch in the middle from May 28-June 1.
LSEG forecast gas demand in the Lower 48, including exports, would ease from 92.6 bcfd this week to 91.8 next week. The forecast for this week was higher than LSEG forecast on Tuesday, while its forecast for next week was lower.
Gas flows to the seven big US LNG export plants rose from an average of 11.9 bcfd in April to 12.7 bcfd so far in May with the return of Freeport LNG’s 2.1-bcfd plant in Texas.