US natgas prices ease on forecasts for less demand, lower flows to LNG export plants

By Scott DiSavino

June 3 (Reuters) - U.S. natural gas futures eased about 1% on forecasts for less demand and lower flows to liquefied natural gas (LNG) export plants over the next two weeks than previously expected.

Gas futures NGc1 for July delivery on the New York Mercantile Exchange fell 4.1 cents, or 1.1%, to $3.653 per million British thermal units. On Monday, the contract closed at its highest since May 9.

Next-day prices at the U.S. Henry Hub benchmark NG-W-HH-SNL in Louisiana were trading around $3 per mmBtu. Low next-day Henry Hub prices have kept pressure on futures in recent weeks with spot contracts trading below front-month futures every day since late April.

Analysts have said that so long as spot prices remain far enough below front-month futures NGc1 to cover margin and storage costs, traders should be able to lock in arbitrage profits by buying spot gas, storing it and selling a futures contract.

In Canada, where wildfires were raging across the country, spot gas prices at the AECO hub NG-ASH-ALB-SNL in Alberta fell to an eight-month low of just 6.3 cents per mmBtu in a sign that gas was trapped in the nation's biggest gas-producing province.

That compares with average AECO prices of $1.41 per mmBtu so far this year, 96 cents in 2024 and $2.28 over the prior five years (2019-2023).

SUPPLY AND DEMAND

Financial firm LSEG said average gas output in the Lower 48 U.S. states fell to 104.0 billion cubic feet per day so far in June, down 105.2 bcfd in May and a monthly record high of 106.3 bcfd in March.

On a daily basis, output was on track to drop to a preliminary three-month low of 102.9 bcfd on Tuesday, down from a 104.3 bcfd on Monday and an average of 105.3 bcfd over the prior seven days. Analysts noted preliminary data was often revised later in the day.

Energy traders said output reductions over the past month or so were primarily due to normal spring maintenance on gas pipelines. Energy firms usually work on gas pipes and other equipment in the spring and autumn when demand for the fuel for heating and cooling is low.

But, some analysts also noted that gas output could also be down as several energy firms cut spending on oil drilling due to a 13% decline in oil prices CLc1 so far this year. That drop in oil drilling also reduces the amount of gas pulled out of the ground associated with that oil production.

About 37% of U.S. gas production comes from associated gas, according to federal energy data.

Meteorologists projected weather across the Lower 48 states would remain mostly warmer than normal through June 18.

LSEG forecast average gas demand in the Lower 48, including exports, will rise from 95.7 bcfd this week to 98.2 bcfd next week. Those forecasts were lower than LSEG's outlook on Monday.

The average amount of gas flowing to the eight big LNG export plants operating in the U.S. fell to 13.8 bcfd so far in June, down from 15.0 bcfd in May and a monthly record high of 16.0 bcfd in April.

Energy traders said LNG feedgas reductions over the past month or so was primarily due to normal spring maintenance, including work at Cheniere Energy's LNG.N plants.

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

To determine CFTC managed money net position add (NYMEX Henry Hub options and futures combined 3023651MNET) plus (ICE Henry Hub options and futures combined 3023391MNET divided by four) plus (NYMEX Henry Hub swaps options and futures combined 303565BMNET divided by four) plus (NYMEX Henry Hub penultimate gas swaps 303565CMNET divided by four)

NYMEX Henry Hub options and futures combined 0#3CFTC023651

NYMEX Henry Hub futures only 0#1CFTC023651

ICE Henry Hub options and futures combined 0#3CFTC023391

NYMEX Henry Hub swaps options and futures combined 0#3CFTC03565B

NYMEX Henry Hub Penultimate gas swaps 0#3CFTC03565C