US natgas prices drop 8% on mild forecasts, rising output
Oct 28 (Reuters) - U.S. natural gas futures dropped about 8% on Monday on forecasts for mild weather through at least mid-November, less demand next week than previously expected and an increase in output in recent days.
Another factor weighing on gas prices was a 6% drop in oil futures on Monday after a limited Israeli attack on Iran over the weekend.
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On its second to last day as the front-month, gas futures for November delivery on the New York Mercantile Exchange fell 20 cents, or 7.8%, to $2.360 per million British thermal units (mmBtu) at 9:45 a.m. EDT (1345 GMT). On Friday, the contract closed at its highest since Oct. 11 for a second day in a row.
Futures for December, which will soon be the front-month, were down about 23 cents to $2.86 per mmBtu.
Even though gas futures gained about 13% last week, speculators turned their net long futures and options positions on the New York Mercantile and Intercontinental Exchanges to net short last week for the first time since April, according to the U.S. Commodity Futures Trading Commission's Commitments of Traders report.
With mild weather keeping demand low and output rising, analysts projected utilities likely injected more gas into storage last week than normal for a second week in a row for the first time since October 2023. There was currently about 5% more gas in storage than is normal for this time of year.
Prior to last week, injections had been smaller than usual for 14 weeks in a row because many producers have reduced drilling activities so far this year after average spot monthly prices at the U.S. Henry Hub benchmark in Louisiana fell to a 32-year low in March. Prices have remained relatively low since then.
Looking ahead, the market is showing signs of giving up on thoughts that extreme cold could cause prices to spike this winter with futures for March 2025 trading at a record low premium over April 2025 of just 5 cents per mmBtu.
March is the last month of the winter storage withdrawal season and April is the first month of the summer storage injection season. Since gas is primarily a winter heating fuel, traders have said summer prices should not trade above winter.
SUPPLY AND DEMAND
Financial group LSEG said average gas output in the Lower 48 U.S. states slipped to 101.6 billion cubic feet per day (bcfd) so far in October, down from 101.8 bcfd in September. That compares with a record 105.5 bcfd in December 2023.
But on a daily basis, output was up about 1.6 bcfd over the past four days to a preliminary eight-week high of 102.8 bcfd on Sunday.
With so many firms curtailing drilling activities so far this year, analysts projected average output in calendar 2024 will decline for the first time since 2020 when the COVID-19 pandemic cut demand for the fuel.
Looking forward, however, analysts projected producers would boost output to meet rising liquefied natural gas (LNG) export demand with two new export plants - Venture Global LNG's Plaquemines in Louisiana and Cheniere Energy's Corpus Christi stage 3 expansion in Texas - expected to enter service later this year.
The Venture Bayou, an LNG tanker, anchored near the mouth of the Mississippi River by early Monday on its way to Plaquemines, data from LSEG showed.
LSEG forecast average gas demand in the Lower 48, including exports, would rise from 99.1 bcfd this week to 101.5 bcfd next week. The forecast for next week was lower than LSEG's outlook on Friday.
(Reporting by Scott DiSavino; editing by David Evans)