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U.S. natural gas futures slid about 2% to a three-month low on Dec. 7 on forecasts for milder weather and lower heating demand as investors worried liquefied natural gas (LNG) exports would not grow much in 2024.
On Dec. 6, Exxon Mobil delayed expected LNG production at its 2.4-billion cubic feet per day (Bcf/d) Golden Pass export plant under construction in Texas to the first half of 2025 from the second half of 2024.
Traders said that delay helped sink futures prices by about 5% on Nov. 6 because it would reduce demand and leave more gas in the U.S., forcing producers to cut production or inject more gas into storage or both.
U.S. Energy Information Administration (EIA) data showed a massive 117 billion cubic feet (Bcf) withdrawal from storage during the week ended Dec. 1, bigger than the 106-Bcf decline analysts forecast in a Reuters poll and exceeding a withdrawal of 30 Bcf in the same week last year and a five-year (2018-2022) average decline of 48 Bcf.
Analysts said last week's withdrawal was bigger than usual because cold weather boosted heating demand.
Front-month gas futures for January delivery on the New York Mercantile Exchange fell 4.4 cents, or 1.7%, to $2.525 per million British thermal units (MMBtu) at 11:04 a.m. EST (1604 GMT). For the second straight day, it was on track for its lowest close since Sept. 6 and also in oversold territory with a Relative Strength Index (RSI) below 30.
With record production levels and ample storage, the gas futures market has been sending bearish signals for weeks that futures prices for this winter (November-March) had likely already peaked in November.
One of the biggest signs the market has given up on winter price spikes was the collapse of the premium of futures for March over April to a record low of just one cent per mmBtu.
March is the last month of the winter storage withdrawal season and April is the first month of the summer storage injection season. Traders have noted that gas demand peaks during the winter heating season and therefore summer prices should not trade
Supply and demand
Financial firm LSEG said average gas output in the Lower 48 U.S. states slid to 107.3 Bcf/d so far in December from a record 107.8 Bcf/d in November.
Daily output was on track to drop by 2.2 Bcf/d over the past four days to a preliminary one-month low of 106.0 Bcf/d on Dec. 7.
Meteorologists projected the weather would turn from warmer-than-normal from Dec. 7-10 to near-normal from Dec. 11-14 and then back to warmer-than-normal from Dec. 15-22.
With seasonally colder weather coming, LSEG forecast U.S. gas demand in the Lower 48, including exports, would rise from 121.5 Bcf/d this week to 126.4 Bcf/d next week. The forecast for this week was lower than LSEG's outlook on Dec. 6.
Gas flows to the seven big U.S. LNG export plants rose to an average of 14.4 Bcf/d so far in December, up from a record 14.3 Bcf/d in November.
2024-03-01 - The U.S. oil and natural gas rig count is at its highest since September 2023.
2024-02-29 - Bids for the 13 shallow water blocks offshore Trinidad and Tobago are now due on May 27.
2024-02-29 - Upstream majors dive into deeper and frontier waters while exploration budgets for 2024 remain flat.
2024-02-28 - TotalEnergies said the Danish North Sea project will take about four months to ramp up and is expected to produce 2.8 Bcm/year.
2024-02-28 - ConocoPhillips is expected to begin production at its Eldfisk Nord project before the first quarter ends.