(Reuters) – U.S. natural gas futures eased on Thursday on rising output, forecasts for less demand over the next two weeks than previously expected and lower global gas prices after Russia said it would send more fuel to Europe for the winter heating season.
That price decline also came ahead of a U.S. report expected to show last week’s storage build was bigger than usual for a seventh week in a row.
Analysts forecast U.S. utilities added 86 billion cubic feet (bcf) of gas into storage during the week ended Oct. 21. That compares with an increase of 32 bcf in the same week last year and a five-year (2016-2020) average increase of 62 bcf. [EIA/GAS]
If correct, last week’s injection would boost stockpiles to 3.547 trillion cubic feet (tcf), which would be 3.5% below the five-year average of 3.674 tcf for this time of year.
Gas prices in Europe were down about 5% for a second day in a row after Russian President Vladimir Putin told Kremlin-controlled energy giant Gazprom to start pumping gas into European gas storage once Russia finishes filling its own stocks, which may happen by Nov. 8.
Since the summer, gas prices around the world have soared to record highs as utilities scramble for liquefied natural gas (LNG) cargoes to refill low stockpiles in Europe and meet rising demand in Asia, where energy shortfalls have caused power blackouts in China.
U.S. futures followed those global gas prices higher – reaching a 12-year high in early October – on expectations demand for U.S. LNG exports would remain strong.
But U.S. gas remains much cheaper than in Europe or Asia, where the fuel was still trading about five times higher than in the United States.
That’s because the United States has more than enough gas in storage for the winter and ample production to meet domestic and export demand. In addition, U.S. export plants were already producing LNG near full capacity so no matter how high global prices rise, the United States could not export much more of the super-cooled fuel.
Analysts expect U.S. gas inventories will top 3.6 trillion cubic feet (tcf) by the start of the winter heating season in November, which they said would be a comfortable level even though it falls short of the 3.7 tcf five-year average. [NGAS/POLL]
U.S. stockpiles were currently about 4% below the five-year (2016-2020) average for this time of year. In Europe, analysts say stockpiles were about 15% below normal.
On its first day as the front-month, gas futures for December delivery fell 7.9 cents, or 1.3%, to $6.119 per million British thermal units (mmBtu) at 7:08 a.m. EDT (1108 GMT).
On Wednesday, when the November future was still the front-month, the contract settled at its highest since Oct. 5, when it closed at its highest since December 2008.
In the spot market, an early shot of cold expected to last all week in Alberta boosted gas prices at the AECO hub to their highest since the February freeze hit Texas. Prices in Alberta had been the cheapest among the North America supply basins for much of this year, which boosted Canadian exports to the United States to their highest in years.
Data provider Refinitiv said output in the U.S. Lower 48 states has averaged 92.3 billion cubic feet per day (bcfd) so far in October, up from 91.1 bcfd in September. That compares with a monthly record of 95.4 bcfd in November 2019.
