US Natgas Futures Slump 2% on Mild Forecasts and Healthy Inventories

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October 20 (Reuters)US natural gas futures slipped about 2% to a four-week low on Wednesday as predictions of mild weather and sub-normal heating demand were expected until at least early November.

Two weeks ago, US gas prices rose to their highest level since 2008 as global competition for liquefied natural gas (LNG) was expected to keep demand for US exports strong. But after weeks of mild weather, US prices have fallen about 25% as belief grows that the United States will have more than enough gas supplies for the winter heating season.

Around the world, however, gas prices have soared to record highs as utilities scramble for more gas to replenish dangerously low stocks in Europe before winter and meet insatiable demand in Asia. High prices and energy shortages in both regions have already resulted in some industries stopping or restricting their manufacturing activities.

But no matter how high the global prices rise, the US LNG export facilities were already almost at full capacity and will not be able to produce more LNG until later in the year.

Analysts expect U.S. gas supplies to exceed 3.5 trillion cubic feet (tcf) by the start of the winter heating season in November, which they think would be a comfortable level despite being below the five-year average of 3.7 trillion cubic feet. NGAS / SURVEY

In Europe, analysts say inventory levels are around 15% below normal for this time of year.

Front Month Gas Futures NGc1 November delivery fell 10.9 cents, or 2.1%, to $ 4.979 per million British thermal units (mmBtu) at 8:47 am EDT (1247 GMT), bringing the contract to its lowest level since September 23 .

The recent declines in the November front month have increased the premium of the December futures versus November NGX21-Z21 to its highest level since August 2010.

The bottom 48 US states rose to an average of 92.0 billion cubic feet per day (bcfd) in October, up from 91.1 billion cubic feet per day in September. This contrasts with a monthly record of 95.4 billion cubic feet in November 2019.

The weather is still getting seasonally cooler and Refinitiv predicts that average U.S. gas demand, including exports, would rise from 85.7 billion cubic feet this week to 87.9 billion cubic feet next week as more households and companies turn on their heaters. Those forecasts were lower than what Refinitiv expected on Tuesday.

With gas prices close to $ 32 per mmBtu in Europe TRNLTTFMc1 and $ 35 in Asia JKMc1, down from just $ 5 in the United States, traders said buyers around the world will continue to buy all of the LNG the United States could produce.

Refinitiv said the amount of gas flowing to U.S. LNG export facilities averaged 10.4 billion cubic feet so far in October, just like in September, but is expected to increase in the coming weeks as more liquefaction trains come out of maintenance outages.

But the United States only has the capacity to convert about 10.5 billion cubic feet of gas to LNG.

Global markets will have to wait until the end of this year to get more when the sixth liquefaction train at Cheniere Energy Inc. LNG.A Venture Global LNG’s Sabine Pass and Calcasieu Pass are expected to begin test-mode production of LNG in Louisiana.

In the electricity market, next-day prices for Wednesday in the ERCOT North Hub EL-PK-ERTN-SNL in Texas rose from $ 44 for Tuesday to $ 145 per megawatt hour as power demand climbs from around 50,000 megawatts (MW) on Tuesday to an expected 55,000 MW on Wednesday.

Traders said electricity demand was expected to spike as consumers turn up their air conditioners, with temperatures in Houston projected to rise from 70 Fahrenheit (24 Celsius) earlier in the week to the 80’s for the next week or so.

Week until October 15th (forecast)

Week until October 8th (actual)

Year ago Oct 15

Five-year average Oct 15

Weekly US Natgas Storage Change (bcf):

94

81

49

69

US total natural gas in storage (bcf):

3,463

3,369

3,919

3,612

Total storage in the US compared to the 5-year average

-4.1%

-4.9%

Global Gas Benchmark Futures ($ per mmBtu)

Present day

The previous day

This month last year

Average of the previous year 2020

Five-year average (2016-2020)

Henry Hub NGc1

5.31

5.09

2.84

2.13

2.66

Title Transfer Facility (TTF) TRNLTTFMc1

31.73

31.18

4.89

3.24

5.19

Japan-Korea marker (JKM) JKMc1

34.89

34.34

5.97

4.22

6.49

Refinitive heating (HDD), cooling (CDD) and total (TDD) degree days

Two week total forecast

Present day

The previous day

Previous year

10 year norm

30 year norm

US GFS disks

136

133

186

128

178

US GFS CDDs

37

36

39

44

28

US GFS TDDs

173

169

225

172

206

Refinitive US Weekly GFS Supply and Demand Forecasts

Previous week

This week

Next week

This week last year

Five year average for month

US supply (bcfd)

US Lower 48 Dry Production

92.2

91.9

92.1

90.0

83.1

US imports from Canada

7.3

7.4

7.2

6.6

7.5

US LNG imports

0.0

0.0

0.0

0.0

0.1

Entire US supply

99.5

99.3

99.3

96.6

90.7

US demand (bcfd)

US exports to Canada

2.4

2.0

2.0

2.3

2.0

US exports to Mexico

5.8

6.0

5.8

6.2

5.0

US LNG exports

10.6

10.7

10.4

8.1

3.7

US advertising

5.3

6.4

7.3

7.1

6.8

US residential real estate

5.0

7.2

9.3

8.1

7.2

US power plant

28.8

25.6

25.1

29.1

27.7

US industry

20.8

21.3

21.5

22.6

21.6

U.S. vegetable fuel

4.6

4.5

4.6

4.5

4.5

US pipe distribution

1.8

1.8

1.9

1.8

1.7

US vehicle fuel

0.1

0.1

0.1

0.1

0.1

Total usage in the US

66.4

67.1

69.7

73.3

69.6

Total US Demand

85.2

85.7

87.9

89.9

80.3

SNL US Next Day Natural Gas Prices ($ per mmBtu)

Hub

Present day

The previous day

Henry Hub NG-W-HH-SNL

4.81

5.01

Transco Z6 New York NG-CG-NY-SNL

3.92

4.47

PG&E Citygate NG-CG-PGE-SNL

6.70

6.70

Dominion South NG-PCN-APP-SNL

3.82

4.39

Chicago Citygate NG-CG-CH-SNL

4.63

4.82

Algonquin Citygate NG-CG-BS-SNL

4.22

4.87

SoCal Citygate NG-SCL-CGT-SNL

6.07

6.71

Waha hub NG-WAH-WTX-SNL

4.65

4.57

SNL US Power next-day pricing ($ per megawatt hour)

Hub

Present day

The previous day

New England EL-PK-NPMS-SNL

56.75

59.00

PJM West EL-PK-PJMW-SNL

44.25

47.25

Ercot North EL-PK-ERTN-SNL

145.00

43.50

Middle C EL-PK-MIDC-SNL

75.00

75.25

Palo Verde EL-PK-PLVD-SNL

62.75

62.75

SP-15 EL-PK-SP15-SNL

61.75

61.75

(Reporting by Scott DiSavino; editing by Bernadette Baum)

((([email protected]; +1 332 219 1922; Reuters Messaging: [email protected]))

The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.

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