NEW YORK: US natural gas futures fell about 5% on Wednesday on rising output and forecasts for less cold weather and lower heating demand over the next two weeks than previously expected.
That price drop happened before the release of a federal report expected to show that utilities added gas to storage last week in what will likely be the last injection of 2024 as mild weather kept heating demand low.
Analysts said utilities likely added 1 billion cubic feet (bcf) of gas to storage during the week ended Nov. 22. That compares with a build of 5 bcf during the same week last year and a five-year average draw of 30 bcf for this time of year.
On its first day as the front month, gas futures for January delivery on the New York Mercantile Exchange were down 15.6 cents, or 4.5%, to $3.311 per million British thermal units (mmBtu) at 8:29 a.m. EST (1329 GMT).
On Tuesday, when December futures were still the front month, the contract closed at its highest level since November 2023 for a second day in a row.
In the spot market, meanwhile, the coming of wintry weather across parts of the United States caused gas prices to rise to their highest since January in several regions, including the Henry Hub benchmark in Louisiana, New York, Chicago and the Eastern Gas South hub in Pennsylvania.
Financial firm LSEG said average gas output in the Lower 48 US states rose to 101.4 billion cubic feet per day (bcfd) so far in November from 101.1 bcfd in October. That compares with a record 105.3 bcfd in December 2023.
Analysts expect producers to boost gas output in 2025 as rising demand from liquefied natural gas (LNG) export plants increase prices after drillers reduced production in 2024 for the first time since the COVID-19 pandemic cut usage of the fuel.
Annual average gas prices at the Henry Hub will soar by over 40% in 2025 after dropping to a four-year low in 2024, according to analysts forecasts.
Meteorologists projected that weather in the Lower 48 will turn from mostly colder than normal now through Dec. 3 to mostly near-normal levels from Dec. 4-12.
With seasonally colder weather coming, LSEG forecast that average gas demand in the Lower 48, including exports, would jump from 114.5 bcfd this week to 131.0 bcfd next week. The forecast for next week was lower than LSEG’s outlook on Tuesday.
The amount of gas flowing to the seven big operating US LNG export plants rose to an average of 13.5 bcfd so far in November from 13.1 bcfd in October. That compares with a monthly record high of 14.7 bcfd in December 2023. Analysts, however, have noted that LNG feedgas would be even higher but for issues at Freeport LNG in Texas.
Gas flows to the 2.1-bcfd Freeport plant have averaged 1.7 bcfd over the past two weeks due in part to various problems that caused two of the plant’s three liquefaction trains to shut unexpectedly. Train 2 tripped off line on Nov. 15 and again on Nov. 22, while Train 3 shut on Nov. 20.