UPDATE 1-U.S. natgas futures down 3% on record output, mild weather forecasts

Reuters
·6 min read

(New throughout, updates prices, market activity and comments) Oct 7 (Reuters) - U.S. natural gas futures fell about 3% on Friday on record output and continued milder than normal weather that will allow utilities to keep injecting more gas into storage than usual in coming weeks. Also weighing on gas prices was a drop in demand from power outages due to storms and reduced liquefied natural gas (LNG) exports. Over 134,000 homes and businesses were still without power in Florida after Hurricane Ian hit on Sept. 28-29, reducing the amount of gas power generators need to burn to produce electricity. Ian knocked out power to over 4 million in Florida and 1.1 million in North Carolina and South Carolina. Gas demand was also reduced by outages at LNG export plants, including Berkshire Hathaway Energy's 0.8-billion cubic feet per day (bcfd) Cove Point in Maryland for about three weeks of planned work starting Oct. 1 and Freeport LNG's 2.0-bcfd plant in Texas for unplanned work after an explosion on June 8. Freeport LNG expects the facility to return to at least partial service in early to mid-November. Front-month gas futures fell 22.4 cents, or 3.2%, to settle at $6.748 per million British thermal units (mmBtu). On Thursday, the contract closed at its highest since Sept. 22 for a second day in a row. For the week, the front-month fell less than 1%, putting the contract down for seven weeks in a row for the first time since January 2015. U.S. futures were up about 81% so far this year as soaring global gas prices fed demand for U.S. exports due to supply disruptions and sanctions linked to Russia's Feb. 24 invasion of Ukraine. Gas was trading around $45 per mmBtu in Europe and $34 in Asia. That was a 9% drop for prices in Europe. Russian gas exports via the three main lines into Germany - Nord Stream 1 (Russia-Germany), Yamal (Russia-Belarus-Poland-Germany) and the Russia-Ukraine-Slovakia-Czech Republic-Germany route - have averaged just 1.3 bcfd so far in October, the same as September but well below 9.2 bcfd seen in October 2021. TOP PRODUCER Data provider Refinitiv said average gas output in the U.S. Lower 48 states rose to 100.1 bcfd so far in October from a monthly record of 99.4 bcfd in September. With cooler weather coming, Refinitiv projected average U.S. gas demand, including exports, would rise from 89.9 bcfd this week to 91.4 bcfd next week and 93.7 bcfd in two weeks. The forecast for this week was lower than Refinitiv's outlook on Thursday. The average amount of gas flowing to U.S. LNG export plants fell to 10.8 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. So far this year, most U.S. LNG has gone to countries in Europe as they wean themselves off Russian energy. Russia, the world's second-biggest gas producer, has provided about a third of Europe's gas in recent years, totaling about 18.3 bcfd in 2021. The European Union wants to cut Russian gas imports by two-thirds by the end of 2022 and refill stockpiles to 80% of capacity by Nov. 1 and 90% by Nov. 1 each year beginning in 2023. Gas stockpiles in northwest Europe - Belgium, France, Germany and the Netherlands - were currently about 7% above their five-year (2017-2021) average for this time of year, according to Refinitiv. Storage was currently around 92% of capacity. That is much healthier than U.S. gas inventories, which were still about 8% below their five-year norm. Week ended Week ended Year ago Five-year Oct 7 Sep 30 Oct 7 average (Forecast) (Actual) Oct 7 U.S. weekly natgas storage change (bcf): +116 +129 +86 +82 U.S. total natgas in storage (bcf): 3,222 3,106 3,357 3,452 U.S. total storage versus 5-year average -6.7% -7.8% 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 6.82 6.97 5.57 3.73 2.89 Title Transfer Facility (TTF) 47.36 49.20 30.84 16.04 7.49 Japan Korea Marker (JKM) 35.86 35.05 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 114 102 46 88 118 U.S. GFS CDDs 51 54 74 67 49 U.S. GFS TDDs 165 156 120 155 167 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 98.4 100.1 100.0 93.5 87.0 U.S. Imports from Canada 7.9 8.0 8.0 8.3 7.7 U.S. LNG Imports 0.0 0.0 0.0 0.0 0.1 Total U.S. Supply 107.3 108.1 108.0 101.8 94.8 U.S. Demand (bcfd) U.S. Exports to Canada 1.9 2.1 2.3 2.0 2.4 U.S. Exports to Mexico 5.8 5.6 5.6 5.7 5.3 U.S. LNG Exports 11.8 11.0 10.8 10.0 5.6 U.S. Commercial 5.4 5.7 6.1 5.0 6.8 U.S. Residential 5.0 5.6 6.3 4.3 7.3 U.S. Power Plant 32.7 31.5 31.6 32.2 29.0 U.S. Industrial 21.6 21.5 21.7 20.9 21.8 U.S. Plant Fuel 4.9 4.9 4.9 4.9 4.9 U.S. Pipe Distribution 1.9 1.9 1.9 1.9 1.9 U.S. Vehicle Fuel 0.1 0.1 0.1 0.1 0.1 Total U.S. Consumption 71.7 71.2 72.7 69.3 71.8 Total U.S. Demand 91.2 89.9 91.4 87.0 85.1 U.S. weekly power generation percent by fuel - EIA Week ended Week ended Week ended Week ended Week ended Oct 7 Sep 30 Sep 23 Sep 16 Sep 9 Wind 8 9 10 8 6 Solar 4 4 3 3 3 Hydro 5 6 5 5 6 Other 3 3 2 2 2 Petroleum 0 0 0 0 0 Natural Gas 42 41 41 42 45 Coal 18 18 19 19 21 Nuclear 20 21 19 19 18 SNL U.S. Natural Gas Next-Day Prices ($ per mmBtu) Hub Current Day Prior Day Henry Hub 6.91 5.84 Transco Z6 New York 5.95 5.86 PG&E Citygate 7.73 7.88 Dominion South 6.01 5.67 Chicago Citygate 6.23 6.15 Algonquin Citygate 6.14 6.05 SoCal Citygate 7.24 7.97 Waha Hub 4.24 4.62 AECO 3.92 4.18 SNL U.S. Power Next-Day Prices ($ per megawatt-hour) Hub Current Day Prior Day New England 61.50 63.25 PJM West 68.25 78.50 Ercot North 57.00 69.00 Mid C 85.50 78.20 Palo Verde 75.50 72.25 SP-15 77.75 82.00 (Reporting by Scott DiSavino Editing by Nick Zieminski)

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