Wednesday, October 20

US natgas falls 4% to 2-week low on mild weather, rising output


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US natural gas futures fell 4% to a two-week low on Monday on rising output and

forecasts milder than normal weather will continue through late October.

That mild weather will keep heating demand light and allow utilities to continue injecting more gas into

storage than usual ahead of the winter. US utilities have already injected more gas into storage than usual

over the past four weeks.

Traders noted US gas futures were down even though gas prices in Europe were up about 5% earlier in the

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day and US oil futures climbed to their highest since October 2014 on worries energy supplies could run

short this winter.

Last week, gas prices in Europe and Asia soared to record highs on worries Europe will not have enough gas

in storage for the winter heating season and as Asia’s demand for the fuel remains insatiable. Those worries

boosted US gas prices to their highest since 2008 last week on expectations competition for gas from Europe

and Asia would keep demand for US liquefied natural gas (LNG) exports strong.

But there is a growing belief in the market that the United States will have more than enough gas for the

winter after four weeks of bigger-than-usual storage builds and a lack of capacity to produce more LNG for

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export.

Front-month gas futures fell 22.0 cents, or 4.0%, to settle at $5.345 per million British thermal

units (mmBtu), their lowest close since Sept. 24.

After US gas futures closed at their highest since 2008 during last week’s record volatility,

speculators cut their net long positions on the New York Mercantile and Intercontinental Exchanges to their

lowest since April 2021 as some traders cashed in their winnings, according to data from the Commodity Futures

Trading Commission (CFTC).

Data provider Refinitiv said gas output in the US Lower 48 states rose to an average of 92.3 billion

cubic feet per day (bcfd) so far in October from 91.1 bcfd in September. That compares with a monthly record

of 95.4 bcfd in November 2019.

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Refinitiv projected average US gas demand, including exports, would rise from 84.9 bcfd this week to

86.1 bcfd next week as the weather turns seasonally cooler and more homes and businesses turn on their

heaters. The forecast for next week was higher than Refinitiv expected on Friday.

With gas prices near $30 per mmBtu in Europe and $32 in Asia, versus under $6 in the

United States, traders said buyers around the world will keep purchasing all the LNG the United States could

produce.

Refinitiv said the amount of gas flowing to US LNG export plants slipped from an average of 10.4 bcfd in

September to 10.1 bcfd so far in October due to short-term upsets at some Gulf Coast plants and ongoing

planned maintenance at Berkshire Hathaway Energy’s Cove Point LNG export plant in Maryland.

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Traders noted the work on Cove Point was expected to last about three weeks, meaning it should return this

week.

But no matter how high global prices rise, the United States only has capacity to turn about 10.5 bcfd of

gas into LNG. Global markets will have to wait until later this year to get more from the United States when

the sixth liquefaction train at Cheniere Energy Inc’s Sabine Pass and Venture Global LNG’s Calcasieu

Pass in Louisiana are expected to start producing LNG in test mode.

Week ended Week ended Year ago Five-year

Oct 8 Oct 1 Oct 8 average

(Forecast) (Actual) Oct 8

US weekly natgas storage change (bcf): 95 118 50 79

US total natgas in storage (bcf): 3,383 3,288 3,870 3,543

US total storage versus 5-year average -4.5% -5.1%

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Global Gas Benchmark Futures ($ per mmBtu) Current Day Prior Day This Month Prior Year Five Year

Last Year Average Average

2020 (2016-2020)

Henry Hub 5.77 5.73 2.84 2.13 2.66

Title Transfer Facility (TTF) 29.83 31.67 4.89 3.24 5.19

Japan Korea Marker (JKM) 32.06 33.08 5.97 4.22 6.49

Refinitiv Heating (HDD), Cooling (CDD) and Total (TDD) Degree Days

Two-Week Total Forecast Current Day Prior Day Prior Year 10-Year 30-Year

Norm Norm

US GFS HDDs 93 73 115 128 136

US GFS CDDs 41 59 60 44 47

US GFS TDDs 134 132 175 172 183

Refinitiv US Weekly GFS Supply and Demand Forecasts

Prior Week Current Week Next Week This Week Five-Year

Last Year Average For

Month

US Supply (bcfd)

US Lower 48 Dry Production 92.0 92.9 92.7 87.0 83.1

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US Imports from Canada 7.4 7.3 7.3 6.6 7.5

US LNG Imports 0.0 0.0 0.0 0.0 0.1

Total US Supply 99.4 100.2 100.0 93.6 90.7

US Demand (bcfd)

US Exports to Canada 2.1 2.4 2.3 2.2 2.0

US Exports to Mexico 5.6 5.6 5.7 6.2 5.0

US LNG Exports 9.9 10.5 10.6 7.2 3.7

US Commercial 5.0 5.3 6.5 6.1 6.8

US Residential 4.3 5.1 7.1 6.3 7.2

US Power Plant 32.0 28.7 25.9 30.6 27.7

US Industrial 20.6 20.7 21.4 22.2 21.6

US Plant Fuel 4.5 4.6 4.6 4.6 4.5

US Pipe Distribution 1.8 1.8 1.8 1.8 1.7

US Vehicle Fuel 0.1 0.1 0.1 0.1 0.1

Total US Consumption 68.4 66.3 67.4 71.7 69.6

Total US Demand 86.1 84.9 86.1 87.3 80.3

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

Hub Current Day Prior Day

Henry Hub 5.69 5.71

Transco Z6 New York 4.19 4.73

PG&E Citygate 7.21 7.01

Dominion South 4.29 4.70

Chicago Citygate 5.21 5.42

Algonquin Citygate 4.63 5.04

SoCal Citygate 5.49 6.54

Waha Hub 5.35 5.41

SNL US Power Next-Day Prices ($ per megawatt-hour)

Hub Current Day Prior Day

New England 55.50 67.25

PJM West 48.50 57.25

Ercot North 84.41 59.17

Mid C 80.06 62.00

Palo Verde 48.50 57.25

SP-15 50.00 58.75

(Reporting by Scott DiSavino; Editing by Steve Orlofsky)

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