U.S. natural gas futures dropped to a seven-month low on Oct. 21, briefly falling below $5/MMBtu, and were on track for a ninth straight week of losses that could help cut U.S. consumer heating costs this winter.
Prices have been falling due to forecasts for mild weather, record output and low LNG exports that have allowed utilities to inject more gas into storage than usual ahead of winter for weeks. Gas prices have plunged about 58% during the past nine weeks.
"The largest overnight weather losses of the season ... are extending the November contract’s free fall to reach seven-month lows this morning," analysts at energy consulting firm EBW Analytics said.
Front-month gas futures fell 38.8 cents to $4.970/MMBtu at 10:29 a.m. EDT (1429 GMT), putting the contract on track for its lowest close since March 21.
That also put the front-month down for a sixth day in a row for the first time since February 2021 and kept it in technically oversold territory, with a relative strength index (RSI) below 30 for a fifth consecutive day for the first time since June 2022.
For the week, the contract was on track to drop about 22%, which would be its biggest weekly decline since falling 24% in December 2021.
Despite weeks of losses, U.S. gas futures were still up about 34% so far this year as soaring global gas prices feed demand for U.S. exports due to supply disruptions and sanctions linked to Russia’s Feb. 24 invasion of Ukraine.
The drop in gas prices should help reduce U.S. heating costs this winter for the 60 million homes that use gas for heat. Lower gas costs should also help reduce costs for the 54 million homes that use electricity for heat since about 38% of the nation's power comes from burning natural gas. Read full story
The U.S. Energy Information Administration (EIA) projected homes burning gas for heat would spend about 29% more this winter than last year, while homes using electric for heat would spend about 10% more. About 88% of the nation's 130 million homes use either gas or electricity for heat.
Major LNG outages include Berkshire Hathaway Energy's shutdown on Oct. 1 of its 800 MMcf/d Cove Point LNG export plant in Maryland for about three weeks of planned maintenance, and the shutdown of Freeport LNG’s 2-Bcf/d plant in Texas for unplanned work after an explosion on June 8. Freeport expects the facility to return to at least partial service in early to mid-November.
At least four vessels were heading to Freeport, according to Refinitiv data, including Prism Brilliance, currently located off the coast from the plant, Prism Diversity, expected to arrive Oct. 30, Prism Courage, expected to arrive Nov. 4, and Seapeak Methane, expected to arrive Nov. 22. Some traders expect Freeport will return to service in November while others believe the return will be delayed. Officials at Freeport said they remain on track to return the plant in November.
Gas was trading at $32/MMBtu in Europe and $32 in Asia.
Data provider Refinitiv said average gas output in the U.S. Lower 48 states rose to 99.5 Bcf/d so far in October, up from a monthly record of 99.4 Bcf/d in September.
Refinitiv projected average U.S. gas demand, including exports, would fall from 100.1 Bcf/d this week to 94.2 Bcf/d next week with the coming of milder weather, before rising to 96.9 Bcf/d in two weeks as the weather cools. The forecast for this week and next were lower than Refinitiv’s outlook on Oct. 20.
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