US natgas prices jump 5% to 10-week high as output drops, technical short-covering

By Scott DiSavino

Oct 1 (Reuters) - U.S. natural gas futures jumped about 5% to a 10-week high on Wednesday on a drop in daily output and some likely technical short-covering.

Prices rose despite a decline in daily gas flows to liquefied natural gas (LNG) export plants, ample amounts of fuel in storage and forecasts for mild weather and less demand over the next two weeks than previously expected.

Front-month gas futures for November delivery NGc1 on the New York Mercantile Exchange (NYMEX) rose 17.3 cents, or 5.2%, to settle at $3.476 per million British thermal units (mmBtu), their highest close since July 18.

That kept the front-month in technically overbought territory for a third day in a row for the first time since February. Prices were also supported because some short sellers needed to cover their positions in recent days, analysts said, noting speculative short positions on the NYMEX reached a 10-month high last week.

In the cash market, average prices at the Waha Hub NG-WAH-WTX-SNL in West Texas remained in negative territory for a sixth day in a row and a 15th time so far this year due to ongoing pipeline constraints in the region from expected and unexpected maintenance work.

In the tropics, the U.S. National Hurricane Center projected that neither the remnants of Hurricane Humberto nor Hurricane Imelda would hit the U.S. East Coast as they moved east across the Atlantic Ocean. Imelda, however, was on track to hit Bermuda overnight on Wednesday.

SUPPLY AND DEMAND

Financial firm LSEG said average gas output in the Lower 48 states fell to 107.0 billion cubic feet per day so far in October, down from 107.4 bcfd in September and a record monthly high of 108.3 bcfd in August.

Record output earlier this year allowed energy companies to inject more gas into storage than usual so far this summer. About 6% more gas was in storage than normal for this time of year. EIA/GAS NGAS/POLL

Meteorologists forecast the weather will remain mostly warmer than normal through at least October 16.

That late-season warmth will likely reduce gas demand by cutting the amount of fuel used to heat homes and businesses by more than the amount of gas power generators burn to keep air conditioners humming.

LSEG projected average gas demand in the Lower 48 states, including exports, would slide from 101.4 bcfd this week to 98.8 bcfd next week. Those forecasts were lower than LSEG's outlook on Tuesday.

The average amount of gas flowing to the eight big U.S. LNG export plants fell to a six-week low of 14.7 bcfd so far in October, down from 15.8 bcfd in September and a monthly record high of 16.0 bcfd in April.

The primary reason for the LNG export feedgas decline was a drop in gas flows to Venture Global LNG's VG.N 1.6-bcfd Calcasieu plant in Louisiana from 1.7 bcfd on Tuesday to around 0.7 bcfd on Wednesday. LNG plants can pull in more gas than they can turn into LNG because they use some of the fuel to power operations.

The U.S. became the world's biggest LNG producer 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 around $11 per mmBtu at both the Dutch Title Transfer Facility TRNLTTFMc1 benchmark in Europe and the Japan Korea Marker JKMc1 benchmark in Asia. NG/EU