US natgas prices climb 2% on contract expiry, forecasts for more demand next week
Oct 29 (Reuters) - U.S. natural gas futures gained about 2% in volatile trade on Tuesday on a one-day drop in output and forecasts for slightly cooler weather and a little more heating demand next week than previously expected.
Earlier in the session, which was volatile due to limited trade on the day the front-month contract expires, the contract was down about 5% to a seven-week low on forecasts for mild weather to continue into at least mid November.
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Gas futures for November delivery on the New York Mercantile Exchange rose 3.7 cents, or 1.6%, to settle at $2.346 per million British thermal units (mmBtu).
Futures for December, which will soon be the front-month contract, eased less than one cent to $2.86 per mmBtu.
With mild weather squeezing demand and output mostly rising in recent days - except on Tuesday - analysts projected utilities likely injected more gas into storage than normal last week for a second week in a row for the first time since October 2023. There was about 5% more gas in storage than normal for this time of year.
Prior to last week, injections had been smaller than usual for 14 weeks in a row because many producers have reduced drilling activities so far this year after average spot monthly prices at the U.S. Henry Hub benchmark in Louisiana fell to a 32-year low in March. Prices have remained relatively low since then.
In the spot market, pipeline constraints caused next-day gas prices at the Waha hub in the Permian Shale in West Texas to remain in negative territory for a record 40th time this year.
SUPPLY AND DEMAND
Financial group LSEG said average gas output in the Lower 48 U.S. states slipped to 101.7 billion cubic feet per day (bcfd) so far in October, down from 101.8 bcfd in September. That compares with a record 105.5 bcfd in December 2023.
On a daily basis, output was on track to drop by 1.0 bcfd to a preliminary four-day low of 102.2 bcfd on Tuesday after climbing about 2.1 bcfd over the prior five days to a preliminary eight-week high of 103.2 bcfd on Monday. Analysts have noted that preliminary data is often revised later in the day.
Meteorologists projected the weather in the Lower 48 states would remain mostly warmer than normal through at least Nov. 13. But even warmer than normal weather in early November is cooler than warmer than normal weather in late October.
With seasonally cooler weather coming, LSEG forecast average gas demand in the Lower 48, including exports, would rise from 99.3 bcfd this week to 102.1 bcfd next week. The forecast for next week was higher than LSEG's outlook on Friday.
The amount of gas flowing to the seven big U.S. liquefied natural gas (LNG) export plants rose to an average of 13.0 bcfd so far in October, up from 12.7 bcfd in September. That compares with a monthly record high of 14.7 bcfd in December 2023.
Analysts have projected that producers would boost output to meet rising LNG export demand with two new export plants - Venture Global LNG's Plaquemines in Louisiana and Cheniere Energy's Corpus Christi stage 3 expansion in Texas - expected to enter service later this year.
The Venture Bayou, an LNG tanker, remained anchored near the mouth of the Mississippi River early on Tuesday before heading to Plaquemines, according to LSEG data. In addition, the LSEG data showed the Venture Gator tanker was in the Gulf of Mexico and also seemed to be headed toward Plaquemines. Venture Global owns both Venture Bayou and Venture Gator.
(Reporting by Scott DiSavino; Editing by Kirsten Donovan and Emelia Sithole-Matarise)