US natgas prices ease on smaller-than-expected output decline, lower demand forecasts

By Scott DiSavino

May 23 (Reuters) - U.S. natural gas futures eased about 1% on Thursday on a smaller-than-expected decline in output in recent days and forecasts for less gas demand this week than previously expected.

Gas futures NGc1 for June delivery on the New York Mercantile Exchange fell 3.1 cents, or 1.0%, to $3.222 per million British thermal units at 8:39 a.m. EDT (1239 GMT).

For the week, the contract was down about 2% after losing around 12% last week.

Looking forward, the premium of futures for July over June NGM25-N25 held near a record 38 cents per mmBtu with several forecasts projecting hotter than normal weather in July and August that should boost the amount of gas burned to produce electricity to power air conditioners.

Some analysts projected energy firms added a near-normal amount of gas into storage during the week ended May 23 after they injected more gas to storage than usual for five weeks in a row as mild weather kept both heating and cooling demand low.

SUPPLY AND DEMAND

Financial firm LSEG said average gas output in the Lower 48 U.S. states fell to 104.9 billion cubic feet per day in May, down from a monthly record high of 105.8 bcfd in April.

On a daily basis, output was on track to slide to a preliminary one-week low of 104.7 bcfd on Friday, down from 104.9 bcfd on Thursday and an average of 105.4 bcfd during the prior seven days. That daily output decline was smaller than LSEG's outlook on Thursday. Analysts noted preliminary data is often revised later in the day.

Energy traders noted output reductions so far this month were due in part to maintenance on gas pipes, including U.S. energy firm Kinder Morgan's KMI.N 2.7-bcfd Permian Highway from the Permian Basin in West Texas to the Texas Gulf Coast.

Kinder Morgan said it will perform a turbine exchange at the Big Lake compressor station from May 13-26 that will reduce mainline capacity to around 2.2 bcfd.

Meteorologists projected the weather across the Lower 48 state would remain mostly warmer than normal through June 7.

LSEG forecast average gas demand in the Lower 48, including exports, will drop from 99.5 bcfd this week to 96.1 bcfd next week before rising to 97.4 bcfd in two weeks. The forecast for this week was lower than LSEG's outlook on Thursday.

The average amount of gas flowing to the eight big LNG export plants operating in the U.S. fell to 15.1 bcfd in May, down from a monthly record of 16.0 bcfd in April.

The LNG feedgas decline this month was mostly due to maintenance reductions at Cameron LNG's 2.0-bcfd plant in Louisiana, Cheniere Energy's LNG.N 3.9-bcfd Corpus Christi plant under construction and in operation in Texas and Cheniere's 4.5-bcfd Sabine Pass in Louisiana, and brief unplanned reductions at Freeport LNG's 2.1-bcfd plant in Texas.

Looking ahead, energy traders said they expect LNG feedgas to remain below April's record high in June with Cheniere planning to conduct about three weeks of maintenance on a couple of liquefaction trains at Sabine from around June 2-23.

The U.S. became the world's biggest LNG supplier in 2023, surpassing Australia and Qatar, as surging global prices fed demand for more exports, due in part to supply disruptions and sanctions linked to Russia's 2022 invasion of Ukraine.

Gas was trading at around $12 per mmBtu at both the Dutch Title Transfer Facility TRNLTTFMc1 benchmark in Europe and the Japan Korea Marker JKMc1 benchmark in Asia. NG/EU

For gas data on the LSEG terminal type ENERGY in the search bar and then go to the GAS drop down and the NORTH AMERICA drop down.

For Interactive Map, type 'Interactive Map' in the box at upper left of the LSEG terminal

For graphics on Baker Hughes rig counts, see: http://graphics.thomsonreuters.com/15/rigcount/index.html

For next-day SNL U.S. gas prices, see: 0#SNL-NG

For next-day SNL U.S. power prices, see: 0#SNL-PWR

For U.S. natgas price and storage polls, see: NGAS/POLL

For U.S. nuclear power outages, see: NUKE/

For U.S. Northwest hydro power report, see: NWRFC

For U.S./Canada natural gas rig count vs Henry Hub futures price, see: http://tmsnrt.rs/2eT9k44

For the U.S. natural gas speed guide, see: USGAS

For the U.S. power speed guide, see: USPOWER

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