US natgas prices steady as output decline offsets lower demand forecast next week

U.S. natural gas futures were little changed on Wednesday as a decline in output and forecasts for more demand this week offset forecasts for less demand next week.

Front-month gas futures NG1! for November delivery on the New York Mercantile Exchange fell 1.0 cent, or 0.3%, to settle at $2.886 per million British thermal units (mmBtu).

That lack of price movement kept the front-month in technically overbought territory for a fourth day in a row for the first time since May.

One factor that has supported prices in recent weeks - the front-month has gained about 44% over the past five weeks - was a drop in the amount of fuel going into storage for the 2024-2025 winter heating season.

Storage injections in July, August and likely in September were at record lows, according to federal energy data going back to 1997.

That's because many producers reduced their drilling activities this year after average spot monthly prices at the U.S. Henry Hub (NG-W-HH-SNL) benchmark in Louisiana fell to a 32-year low in March. They have remained relatively low since that time.

Even though storage injections have been lower than usual in 19 of the past 20 weeks, however, the amount of gas in inventory was still about 6% above normal levels for this time of year due to low heating demand during the mild winter of 2023-2024.

One factor that has weighed on gas prices in recent days was the reduction in the amount that gas power generators need to burn, with over 1.3 million homes and businesses still without power in the U.S. Southeast and Midwest after Hurricane Helene battered the region late last week.

The U.S. National Hurricane Center projected that there was a 40% chance that a tropical cyclone could form in the Gulf of Mexico over the next week.

SUPPLY AND DEMAND

Financial firm LSEG said gas output in the Lower 48 U.S. states has fallen to an average of 100.5 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.

In other news, Chesapeake Energy completed its merger with Southwestern Energy to form Expand Energy (EXE.N), which is now the nation's biggest gas producer with around 7 bcfd of capacity. That tops former leader EQT EQT with around 6 bcfd of capacity.

EQT , meanwhile, said in a federal filing that it would lay off about 15% of its workforce as part of an integration process following its $14 billion acquisition of Equitrans.

LSEG forecast average gas demand in the Lower 48, including exports, will hold around 95.4 bcfd this week and next. The forecast for this week was higher than LSEG's outlook on Tuesday, while the forecast for next week was lower.

Gas flows to the seven big U.S. liquefied natural gas (LNG) export plants have fallen to an average of 11.9 bcfd so far in October, down from 12.7 bcfd in September. That compares with a monthly record high of 14.7 bcfd in December 2023.

That reduction was due mostly to the planned Sept. 20 shutdown of Berkshire Hathaway Energy's 0.8-bcfd Cove Point LNG export plant in Maryland for around three weeks of annual maintenance.