U.S. natgas prices slide 3% on rising output, high stockpiles

(Reuters)U.S. natural gas futures slid about 3% on Wednesday on signs some drillers were starting to pull more gas out of the ground and worries about the tremendous oversupply of gas still in storage.

That price decline came despite forecasts for more demand next week than previously expected and as more gas flowed to liquefied natural gas (LNG) export plants.

Analysts forecast gas stockpiles were about 27% above normal levels for this time of year. On its last day as the front-month, gas futures for June delivery on the New York Mercantile Exchange fell 6.4 cents, or 2.5%, to $2.526 per million British thermal units (MMBtu). Futures for July, which will soon be the front-month, were down 2.6% at $2.75 per MMBtu.

Supply and demand. Gas output in the Lower 48 U.S. states fell to an average of 97.7 billion cubic feet per day (Bft3d) so far in May, down from 98.2 Bft3d in April, according to financial firm LSEG. That compares with a monthly record of 105.5 Bft3d in December 2023.

But on a daily basis, output was up about 0.5 Bft3d since hitting a 15-week low of 96.3 Bft3d on May 1. Energy traders said that increase was a sign that the 56% gain in futures prices over the past four weeks prompted some drillers to start producing more gas.

Overall, however, U.S. gas production was still down around 9% so far in 2024 as several energy firms, including EQT and Chesapeake Energy, delayed well completions and cut other drilling activities after prices fell to 3.5-yr lows in February and March.

EQT is the biggest U.S. gas producer and Chesapeake is on track to become the biggest producer after its merger with Southwestern Energy.

Meteorologists projected weather across the Lower 48 states would remain mostly near normal until June 2 before turning warmer than normal from June 3–13.

LSEG forecast gas demand in the Lower 48, including exports, would rise from 93.6 Bft3d this week to 94.1 Bft3d next week. The forecast for next week was higher than LSEG's outlook on Tuesday.

Gas flows to the seven big U.S. LNG export plants rose from an average of 11.9 Bft3d in April to 12.8 Bft3d so far in May with the return of Freeport LNG’s 2.1- Bft3d plant in Texas.

That LNG feedgas, however, remained down from the monthly record of 14.7 Bft3d in December due to ongoing spring maintenance at Kinder Morgan's Elba Island in Georgia and several plants in Louisiana, including Cameron LNG, Cheniere Energy's Sabine Pass and Venture Global's Calcasieu Pass.

U.S. exports to Mexico rose to an average of 7.1 Bft3d so far in May, up from 6.5 Bft3d in April and the current monthly record of 7.0 Bft3d in August 2023. Analysts said that signaled U.S. energy firm New Fortress Energy was preparing to turn U.S. gas into LNG at its export plant in Altamira, Mexico.


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