U.S. natgas falls 5% to 3-mth low on mild weather, global price collapse

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U.S. natural gas futures plunged about 5% to a fresh three-month low on Tuesday due

to a drop in prices of oil and European gas and forecasts for milder weather over the next two weeks than

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previously expected.

U.S. gas prices have been declining for eight weeks as record domestic output and reduced liquefied

natural gas (LNG) exports have allowed utilities to inject much bigger than normal amounts of gas into storage

over the past month.

Major LNG outages include Berkshire Hathaway Energy’s shutdown of its 0.8 billion-cubic-feet-per-day

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(bcfd) Cove Point LNG export plant in Maryland for about three weeks of planned maintenance on Oct. 1 and the

continuing shutdown of Freeport LNG’s 2.0-bcfd plant in Texas for unplanned work after an explosion on June 8.

Freeport expects the facility to return to at least partial service in early to mid-November.

At least three vessels were heading to Freeport, according to Refinitiv data, including Prism Brilliance

(expected to arrive Oct. 18), Prism Diversity (Oct. 27) and Seapeak Methane (Nov. 22), prompting some traders

to believe Freeport will return in November. Others in the market, however, believe the plant’s return will be

delayed. Officials at Freeport said they remain on track to return the plant in November.

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Front-month gas futures fell 30.8 cents, or 5.1%, to $5.691 per million British thermal units

(mmBtu) at 12:17 p.m. EDT (1617 GMT), putting the contract on track for its lowest close since July 6 for a

second day in a row.

That kept the front-month in technically oversold territory with a relative strength index (RSI) below

30 for a second day in a row.

Oil prices fell about 3% on rising U.S. supplies, fears of economic slowdown and lower

Chinese fuel demand.

Despite recent declines, U.S. gas futures were still up about 53% this year as soaring global gas prices

feed demand for U.S. exports due to supply disruptions and sanctions linked to Russia’s Feb. 24 invasion of

Ukraine.

Gas was trading at $32 per mmBtu in Europe and $31 in Asia.

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That put European forwards down about 30% over the past week and on track for their lowest close since

June 14 as strong LNG imports boosted the amount of gas in storage in Northwest Europe to healthy levels above

90% of capacity. European prices hit an all-time high of $90.91 on Aug. 25.

During the first nine months of 2022, roughly 60%, or 6.3 bcfd, of U.S. LNG exports went to Europe, as

shippers diverted cargoes from Asia to fetch higher prices. Last year, just 29%, or about 2.8 bcfd, of U.S.

LNG exports went to Europe.

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U.S. gas futures lag far behind global prices because the world’s top producer has all the fuel it needs

for domestic use, while capacity constraints and the Freeport outage prevent the country from exporting more

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LNG.

Data provider Refinitiv said average gas output in the U.S. Lower 48 states has risen to 99.6 bcfd so far

in October, up from a monthly record of 99.4 bcfd in September.

With milder weather coming, Refinitiv projected average U.S. gas demand, including exports, would fall

from 101.0 bcfd this week to 95.9 bcfd next week. Those forecasts were higher than Refinitiv’s outlook on

Monday.

The average amount of gas flowing to U.S. LNG export plants has fallen to 11.0 bcfd so far in October from

11.5 bcfd in September. That compares with a monthly record of 12.9 bcfd in March. The seven big U.S. export

plants can turn about 13.8 bcfd of gas into LNG.

U.S. LNG exports, however, could start to rise this week if Cove Point returns to service as some traders

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expect.

Week ended Week ended Year ago Five-year

Oct 14 Oct 7 Oct 14 average

(Forecast) (Actual) Oct 14

U.S. weekly natgas storage change (bcf): +104 +125 +91 +73

U.S. total natgas in storage (bcf): 3,335 3,231 3,448 3,525

U.S. total storage versus 5-year average -5.4% -6.4%

Global Gas Benchmark Futures ($ per mmBtu) Current Day Prior Day This Month Prior Year Five Year

Last Year Average Average

2021 (2017-2021)

Henry Hub 5.99 5.99 5.57 3.73 2.89

Title Transfer Facility (TTF) 34.61 37.48 30.84 16.04 7.49

Japan Korea Marker (JKM) 30.92 32.25 33.22 18.00 8.95

Refinitiv Heating (HDD), Cooling (CDD) and Total (TDD) Degree Days

Two-Week Total Forecast Current Day Prior Day Prior Year 10-Year 30-Year

Norm Norm

U.S. GFS HDDs 157 164 130 152 168

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U.S. GFS CDDs 25 29 29 38 31

U.S. GFS TDDs 182 193 159 190 199

Refinitiv U.S. Weekly GFS Supply and Demand Forecasts

Prior Week Current Week Next Week This Week Five-Year

Last Year Average For

Month

U.S. Supply (bcfd)

U.S. Lower 48 Dry Production 99.7 98.5 98.9 94.2 87.0

U.S. Imports from Canada 7.8 7.7 7.8 8.1 7.7

U.S. LNG Imports 0.0 0.0 0.0 0.0 0.1

Total U.S. Supply 107.4 106.2 106.7 102.3 94.8

U.S. Demand (bcfd)

U.S. Exports to Canada 2.5 2.1 2.2 1.9 2.4

U.S. Exports to Mexico 5.6 5.7 5.7 6.0 5.3

U.S. LNG Exports 11.0 11.6 11.2 10.6 5.6

U.S. Commercial 6.2 8.4 7.7 6.5 6.8

U.S. Residential 6.7 10.9 9.8 7.5 7.3

U.S. Power Plant 31.9 31.6 29.6 27.4 29.0

U.S. Industrial 21.8 23.4 22.6 21.6 21.8

U.S. Plant Fuel 4.9 4.9 4.9 4.9 4.9

U.S. Pipe Distribution 2.0 2.2 2.0 2.2 1.9

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U.S. Vehicle Fuel 0.1 0.1 0.1 0.1 0.1

Total U.S. Consumption 73.6 81.6 76.9 70.2 71.8

Total U.S. Demand 92.5 101.0 95.9 88.7 85.1

U.S. weekly power generation percent by fuel – EIA

Week ended Week ended Week ended Week ended Week ended

Oct 21 Oct 14 Oct 7 Sep 30 Sep 23

Wind 11 11 9 10 8

Solar 3 4 4 3 3

Hydro 5 5 6 5 5

Other 4 3 2 2 2

Petroleum 0 0 0 0 0

Natural Gas 37 41 41 41 42

Coal 19 18 18 19 19

Nuclear 21 19 21 19 19

SNL U.S. Natural Gas Next-Day Prices ($ per mmBtu)

Hub Current Day Prior Day

Henry Hub 6.08 6.10

Transco Z6 New York 5.56 5.55

PG&E Citygate 7.70 7.74

Dominion South 5.25 5.02

Chicago Citygate 5.77 5.30

Algonquin Citygate 5.80 5.35

SoCal Citygate 6.98 5.87

Waha Hub 4.25 3.71

AECO 1.03 2.73

SNL U.S. Power Next-Day Prices ($ per megawatt-hour)

Hub Current Day

New England 59.00 47.00

PJM West 83.00 70.00

Ercot North 60.00 60.50

Mid C 91.00 86.00

Palo Verde 78.50 70.00

SP-15 81.75 60.75

(Reporting by Scott DiSavino; Editing by Paul Simao and Marguerita Choy)