US natgas futures drop 5% on record output, lower demand

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U.S. natural gas futures dropped about 5% on Tuesday as drillers keep pulling record amounts of gas out

of the ground while seasonally warmer weather cuts heating demand and the amount of gas flowing to liquefied natural gas (LNG)

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export plants declines as units shut for spring maintenance.

Energy traders said gas futures were also pressured by a roughly 5% drop in prices of oil, gasoline and

diesel futures on concerns about the economy, as U.S. politicians discuss ways to avoid a debt default and investors

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prepare for another U.S. interest rate hike this week.

Front-month gas futures for June delivery on the New York Mercantile Exchange fell 10.4 cents, or 4.5%, to settle

at $2.214 per million British thermal units (mmBtu).

Data provider Refinitiv said average gas output in the U.S. Lower 48 states rose to 101.7 billion cubic feet per day

(bcfd) so far in May, up from a record 101.4 bcfd in April.

Meteorologists projected the weather in the Lower 48 states would turn from colder-than-normal now to near- to

warmer-than-normal from May 6-17.

With the weather turning seasonally warmer, Refinitiv forecast U.S. gas demand, including exports, would slide from 95.4 bcfd

this week to 91.1 bcfd next week. The forecast for this week was lower than Refinitiv’s outlook on Monday, while its forecast for

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next week was higher.

Gas flows to the seven big U.S. LNG export plants slid to an average of 13.5 bcfd so far in May, down from a record 14.0 bcfd

in April. The decline was due mostly to reductions at Cameron LNG’s facility in Louisiana.

Last month’s record was higher than the 13.8 bcfd of gas the seven plants can turn into LNG since the facilities also use

some of the fuel to power equipment used to produce LNG.

GLOBAL GAS PRICE COLLAPSE

Some analysts have questioned whether this year’s gas price collapse in Europe and Asia could force U.S. exporters to cancel

LNG cargoes this summer after mostly mild weather over the winter left massive amounts of gas in storage. In 2020, at least 175

LNG shipments were canceled due to oversupply and weak demand.

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But for now, most analysts say energy security concerns following Russia’s invasion of Ukraine in February 2022 should keep

global gas prices high enough to sustain record U.S. LNG exports in 2023.

Gas was trading at a 21-month low of around $12 per mmBtu at the Dutch Title Transfer Facility (TTF) benchmark in Europe

and a 22-month low of $11 at the Japan Korea Marker (JKM) in Asia.

Even though TTF gas prices were down about 48% and JKM was down about 61% so far this year, traders said those prices were

high enough to feed demand for U.S. LNG exports.

U.S. gas futures, which were also down about 51% so far this year, lag far behind global prices because the United States is

the world’s top producer with all the fuel it needs for domestic use, while capacity constraints prevent the country from

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exporting more LNG.

Gas stockpiles in northwest Europe – Belgium, France, Germany and the Netherlands – were currently at about

60% of capacity, keeping the amount of gas in storage about 57% above its five-year (2018-2022) average for the time of year,

according to Refinitiv.

That is much more gas in storage than in U.S. inventories, which were about 22% above their five-year norm again due to

mostly mild weather last winter.

To ensure Europe has enough gas for the winter heating season, the European Union wants utilities to refill stockpiles to 90%

of capacity by Nov. 1.

Week ended Week ended Year ago Five-year

Apr 28 Apr 21 Apr 28 average

(Forecast) (Actual) Apr 28

U.S. weekly natgas storage change (bcf): 53 79 72 78

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U.S. total natgas in storage (bcf): 2,062 2,009 1,556 1,722

U.S. total storage versus 5-year average 19.7% 22.2%

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

Day Last Year Average Average

2022 (2018-2022)

Henry Hub 2.32 2.32 8.16 6.54 3.60

Title Transfer Facility (TTF) 12.30 12.30 28.96 40.50 14.39

Japan Korea Marker (JKM) 11.55 11.55 22.70 34.11 14.31

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

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

Day Norm

U.S. GFS HDDs 85 95 77 90 86

U.S. GFS CDDs 69 64 85 63 64

U.S. GFS TDDs 154 159 162 153 150

Refinitiv U.S. Weekly GFS Supply and Demand Forecasts

Prior Week Current Next Week This Week Five-Year

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Week Last Year Average For

Month

U.S. Supply (bcfd)

U.S. Lower 48 Dry Production 101.7 102.3 102.6 96.0 89.1

U.S. Imports from Canada 7.1 7.2 7.0 9.4 7.7

U.S. LNG Imports 0.0 0.0 0.0 0.0 0.1

Total U.S. Supply 108.8 109.5 109.6 105.4 96.9

U.S. Demand (bcfd)

U.S. Exports to Canada 2.0 2.1 2.1 2.8 2.3

U.S. Exports to Mexico 5.6 5.3 5.0 6.0 5.2

U.S. LNG Exports 13.9 13.5 13.5 12.2 7.0

U.S. Commercial 8.0 7.4 5.7 6.6 5.7

U.S. Residential 10.3 9.6 6.5 7.9 6.7

U.S. Power Plant 29.9 28.4 30.2 27.8 27.5

U.S. Industrial 22.3 21.9 21.0 21.2 21.3

U.S. Plant Fuel 5.0 5.1 5.1 5.0 5.0

U.S. Pipe Distribution 2.1 2.0 1.9 2.1 2.1

U.S. Vehicle Fuel 0.1 0.1 0.1 0.1 0.1

Total U.S. Consumption 7.7 74.5 70.5 70.7 68.4

Total U.S. Demand 99.3 95.4 91.1 91.7 82.9

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

Week ended Week ended Week ended Week ended Week ended

May 5 Apr 28 Apr 21 Apr 14 Apr 7

Wind 16 12 17 15 16

Solar 5 4 5 5 4

Hydro 8 7 7 7 7

Other 3 3 3 2 2

Petroleum 0 0 0 0 0

Natural Gas 36 39 37 38 38

Coal 13 16 14 14 15

Nuclear 20 19 18 19 19

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

Hub Current Prior Day

Day

Henry Hub 2.24 2.27

Transco Z6 New York 2.13 1.90

PG&E Citygate 4.74 5.06

Eastern Gas (old Dominion South) 1.88 1.80

Chicago Citygate 2.10 2.12

Algonquin Citygate 2.43 1.86

SoCal Citygate 4.00 3.14

Waha Hub 1.46 1.34

AECO 1.65 1.62

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

Hub Current Prior Day

Day

New England 32.50 30.75

PJM West 33.00 30.00

Ercot North 29.50 20.00

Mid C 50.00 60.00

Palo Verde 46.00 51.67

SP-15 37.75 38.50

(Reporting by Scott DiSavino; Editing by Louise Heavens and Leslie Adler)