U.S. natgas futures drop 8% on rising output, lower demand forecasts

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U.S. natural gas futures plunged about 8%

on Friday from the previous session’s 13-year high on forecasts

for a rise in output, milder weather and a drop in demand in the

next two weeks.

U.S. front-month gas futures for June delivery fell

74.0 cents, or 8.4%, to settle at $8.043 per million British

thermal units, their biggest one-day percentage drop since

February 2022. On Thursday, the contract closed at its highest

since August 2008 for a third day in a row.

Despite Friday’s decline, the contract was still up about

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11% for the week.

Earlier in the week, U.S. gas futures followed oil

prices higher after the European Union proposed a phased

embargo on Russian oil in response to Moscow’s Feb. 24 invasion

of Ukraine.

Analysts said the proposed oil embargo increased the

possibility the EU would seek to ban Russian gas in the future.

Forecasts for extreme heat this weekend in Texas and other

Gulf Coast states should boost the amount of gas power

generators burn to keep air conditioners humming, pushing

next-day gas prices at the Henry Hub benchmark in

Louisiana to their highest since the February freeze of 2021.

One of the more surprising things about the recent U.S. gas

price run-up was that while U.S. futures soared about 46% over

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the past month, European gas lost about 5% during that time as

Russia continued sending supplies via pipeline and liquefied

natural gas (LNG) vessels keep delivering cargoes.

U.S. gas futures have already gained about 115% so far this

year as higher global prices kept demand for U.S. LNG exports

near record highs since Russia’s invasion. Gas was trading

around $31 per mmBtu in Europe and $24 in Asia

.

Data provider Refinitiv said average gas output in the U.S.

Lower 48 states has increased in recent days, running at 94.3

billion cubic feet per day (bcfd) so far in May, compared with

94.5 bcfd for the whole month of April.

Refinitiv projected average U.S. gas demand, including

exports, would slide from 90.6 bcfd this week to 90.4 bcfd next

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week and 89.5 bcfd in two weeks as the weather turns seasonally

milder. The forecast for next week was higher than Refinitiv’s

outlook on Thursday.

The amount of gas flowing to U.S. LNG export plants rose to

12.3 bcfd so far in May from 12.2 bcfd in April, but remains

below the monthly record of 12.9 bcfd in March. The United

States can turn about 13.2 bcfd of gas into LNG.

Since the United States will not be able to produce much

more LNG anytime soon, it has worked with allies to divert LNG

exports from elsewhere to Europe to help EU countries and others

break their dependence on Russian gas.

Russia, the world’s second-biggest gas producer, has

provided about 30%-40% of Europe’s gas, totaling about 18.3 bcfd

in 2021. The EU wants to cut Russian gas imports by two-thirds

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by the end of 2022 and refill stockpiles to 80% of capacity by

Nov. 1, 2022 and 90% by Nov. 1 each year from 2023.

Gas stockpiles in Northwest Europe – Belgium, France,

Germany and the Netherlands – were about 18%

below the five-year (2017-2021) average for this time of year,

according to Refinitiv. That is about 32% of full capacity.

Week ended Week ended Year ago Five-year

May 6 Apr 29 May 6 average

(Forecast) (Actual) May 6

U.S. weekly natgas storage change (bcf): +77 +77 +70 +82

U.S. total natgas in storage (bcf): 1,644 1,567 2,019 1,955

U.S. total storage versus 5-year average -15.9% -16.3%

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

Last Year Average Average

2021 (2017-2021)

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Henry Hub 8.96 8.78 2.96 3.73 2.89

Title Transfer Facility (TTF) 32.50 33.08 8.88 16.04 7.49

Japan Korea Marker (JKM) 24.15 24.04 9.65 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

Norm Norm

U.S. GFS HDDs 60 61 97 87 75

U.S. GFS CDDs 103 103 51 65 71

U.S. GFS TDDs 163 164 148 152 146

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 93.7 94.3 94.5 92.0 83.9

U.S. Imports from Canada 8.8 8.6 8.5 7.4 7.6

U.S. LNG Imports 0.0 0.0 0.0 0.0 0.1

Total U.S. Supply 102.5 102.9 103.0 99.4 92.6

U.S. Demand (bcfd)

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U.S. Exports to Canada 2.8 2.8 2.8 2.3 2.1

U.S. Exports to Mexico 6.3 5.9 6.2 6.0 4.8

U.S. LNG Exports 12.2 12.2 12.4 11.4 5.1

U.S. Commercial 7.7 6.7 6.3 6.0 5.6

U.S. Residential 10.0 8.1 7.5 6.7 6.7

U.S. Power Plant 25.4 27.1 27.6 25.6 26.0

U.S. Industrial 22.1 21.2 21.0 22.0 20.9

U.S. Plant Fuel 4.6 4.7 4.7 4.6 4.6

U.S. Pipe Distribution 1.9 1.9 1.8 1.9 1.8

U.S. Vehicle Fuel 0.1 0.1 0.1 0.1 0.1

Total U.S. Consumption 71.8 69.7 69.1 66.9 65.7

Total U.S. Demand 93.2 90.6 90.4 86.6 77.7

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

Week ended Week ended Week ended Week ended Week ended

May 6 Apr 29 Apr 22 Apr 15 Apr 8

Wind 14 16 16 17 15

Solar 4 4 4 4 4

Hydro 6 7 7 7 8

Other 2 2 2 2 2

Petroleum 0 0 0 0 0

Natural Gas 35 33 33 32 33

Coal 19 19 19 19 19

Nuclear 20 19 19 19 19

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

Hub Current Day Prior Day

Henry Hub 8.42 8.30

Transco Z6 New York 7.44 7.65

PG&E Citygate 9.27 9.55

Dominion South 7.34 7.54

Chicago Citygate 8.05 8.21

Algonquin Citygate 7.81 8.45

SoCal Citygate 8.21 8.60

Waha Hub 7.92 8.00

AECO 6.69 6.90

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

Hub Current Day

New England 75.00 77.00

PJM West 69.50 71.50

Ercot North 163.75 105.75

Mid C 77.00 88.71

Palo Verde 55.50 59.25

SP-15 55.00 65.25

(Reporting by Scott DiSavino; Editing by Edmund Blair and

Marguerita Choy)