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U.S. natgas falls 4% to 10-week low on oil price drop, mild forecasts

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U.S. natural gas futures fell about 4% to a fresh 10-week low on Friday on a drop

in crude prices and expectations the weather will remain mild into early October, keeping both heating and

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cooling demand low and allowing utilities to inject lots of gas into storage over the next few weeks.

In addition, the U.S. National Hurricane Center (NHC) projected that Tropical Depression 9 will strengthen

into a hurricane as it moves from the Caribbean Sea to the Gulf of Mexico over the next few days before

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hitting South Florida on Wednesday.

With much of the nation’s gas production located away from the Gulf of Mexico in shale basins like the

Permian in West Texas and Appalachia in Pennsylvania, analysts said tropical storms were more

demand-destroying events since they knock out power and can cause liquefied natural gas (LNG) export terminals

to shut.

Another factor weighing on gas prices was the expectation that demand would decline in October when

the Cove Point LNG plant in Maryland shuts for a couple weeks of maintenance. Cove Point is consuming about

0.8 billion cubic feet per day (bcfd) of gas.

U.S. gas use has already been reduced for months by the ongoing outage at the Freeport LNG export plant in

Texas which has left more gas in the United States for utilities to inject into stockpiles for next winter.

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Freeport, the second-biggest U.S. LNG export plant, was consuming about 2 bcfd of gas before it shut on

June 8. Freeport LNG expects the facility to return to at least partial service in early to mid-November.

In Puerto Rico, meanwhile, an estimated 927,000 homes and businesses remain without power after Hurricane

Fiona hit on Sunday.

Front-month gas futures fell 26.1 cents, or 3.7%, to settle at $6.828 per million British thermal

units (mmBtu), their lowest close since July 14.

Oil prices plunged about 5% to an eight-month low as the U.S. dollar hit its strongest level in more than

two decades and on fears rising interest rates will tip major economies into recession.

The gas price drop kept gas futures in technically oversold territory with a relative strength index

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(RSI) below 30 for a second day in a row.

For the week, the gas contract fell about 12%, its biggest weekly percentage decline since June. That was

also the first time the front-month fell for five weeks in a row since January 2019.

Analysts at energy consulting firm EBW Analytics said recent gas price declines caused gas prices to fall

below ethane prices, which should cause energy firms to capture ethane rather than rejecting it into gas

pipes. That should reduce the amount of total gas (plus ethane) available to the market.

Despite recent declines, gas futures were still up about 83% so far this year as higher prices in

Europe and Asia keep demand for U.S. LNG exports strong. Global gas prices have soared due to supply

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disruptions and sanctions linked to Russia’s Feb. 24 invasion of Ukraine.

Gas was trading around $51 per mmBtu in Europe and $38 in Asia.

Data provider Refinitiv said average gas output in the U.S. Lower 48 states rose to 98.7 bcfd so far in

September from a record 98.0 bcfd in August.

With cooler autumn weather coming, Refinitiv projected average U.S. gas demand, including exports, would

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slip from 92.4 bcfd this week to 91.4 bcfd next week and 88.7 bcfd in two weeks. The forecasts for next week

was higher than Refinitiv’s outlook on Thursday.

The average amount of gas flowing to U.S. LNG export plants rose to 11.3 bcfd so far in September from

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

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plants can turn about 13.8 bcfd of gas into LNG.

Week ended Week ended Year ago Five-year

Sep 23 Sep 16 Sep 23 average

(Forecast) (Actual) Sep 23

U.S. weekly natgas storage change (bcf): +86 +103 +86 +77

U.S. total natgas in storage (bcf): 2,960 2,874 3,157 3,283

U.S. total storage versus 5-year average -9.8% -10.4%

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 7.17 7.09 5.11 3.73 2.89

Title Transfer Facility (TTF) 53.11 53.91 22.61 16.04 7.49

Japan Korea Marker (JKM) 39.91 38.92 23.35 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

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Norm Norm

U.S. GFS HDDs 53 46 25 44 67

U.S. GFS CDDs 88 96 98 104 81

U.S. GFS TDDs 141 142 123 148 148

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 98.8 98.3 98.2 93.5 87.0

U.S. Imports from Canada 7.7 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 106.5 106.2 106.2 101.8 95.8

U.S. Demand (bcfd)

U.S. Exports to Canada 2.4 2.1 2.0 2.5 2.4

U.S. Exports to Mexico 5.5 5.5 5.6 5.9 5.3

U.S. LNG Exports 11.3 11.5 11.0 10.1 4.9

U.S. Commercial 4.7 4.8 5.4 4.9 4.9

U.S. Residential 3.7 3.9 5.0 4.2 3.9

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U.S. Power Plant 37.1 36.4 33.7 31.5 33.2

U.S. Industrial 21.3 21.3 21.8 20.8 21.2

U.S. Plant Fuel 4.9 4.9 4.8 4.9 4.9

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U.S. Pipe Distribution 2.0 1.9 1.9 1.9 2.1

U.S. Vehicle Fuel 0.1 0.1 0.1 0.1 0.1

Total U.S. Consumption 73.8 73.3 72.8 68.3 70.3

Total U.S. Demand 93.0 92.4 91.4 86.8 82.9

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

Week ended Week ended Week ended Week ended Week ended

Sep 23 Sep 16 Sep 9 Sep 2 Aug 26

Wind 10 8 6 7 5

Solar 3 3 3 3 3

Hydro 5 5 6 5 6

Other 2 2 2 2 2

Petroleum 0 0 0 0 0

Natural Gas 41 42 45 44 44

Coal 19 19 21 21 22

Nuclear 19 19 18 17 18

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

Hub Current Day Prior Day

Henry Hub 7.76 7.99

Transco Z6 New York 5.50 6.00

PG&E Citygate 8.01 8.29

Dominion South 5.47 6.15

Chicago Citygate 6.38 6.80

Algonquin Citygate 5.85 6.45

SoCal Citygate 6.82 7.35

Waha Hub 4.88 6.63

AECO 4.25 3.58

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

Hub Current Day Prior Day

New England 63.00 76.25

PJM West 66.25 90.00

Ercot North 83.00 143.00

Mid C 59.25 63.00

Palo Verde 70.50 68.75

SP-15 72.25 69.50

(Reporting by Scott DiSavino; Editing by Andrea Ricci and Diane Craft)

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