US natgas prices hold near 3-week low on record output, mild weather
Oct 23 (Reuters) - U.S. natural gas futures held near a three-week low on Monday on record output, ample storage, mild weather, low heating demand and low spot prices.
After falling for eight days in a row, front-month gas futures for November delivery on the New York Mercantile Exchange remained unchanged at $2.899 per million British thermal units (mmBtu) at 9:33 a.m. EDT (1333 GMT). On Friday, the contract closed at its lowest since Oct. 2.
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If the contract falls for a ninth day in a row, it would be the first time since October 2019 when it fell for a record 12 days in a row.
With the front-month down about 10% last week, speculators cut their net long futures and options positions on the New York Mercantile and Intercontinental Exchanges to their lowest since early October, according to the U.S. Commodity Futures Trading Commission's Commitments of Traders report.
One bearish factor that has weighed on the futures market for most of this year has been lower spot or next-day prices at the Henry Hub benchmark <NG-W-HH-SNL> in Louisiana. The spot market has traded below front-month futures for 167 out of 202 trading days so far this year, according to data from financial firm LSEG.
Next-day prices at the Henry Hub were down about 8% to around $2.60 per mmBtu for Monday.
Analysts have noted that so long as spot prices remain far enough below front-month futures 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.
SUPPLY AND DEMAND
LSEG said average gas output in the Lower 48 U.S. states rose to an average of 103.9 billion cubic feet per day (bcfd) so far in October, up from 102.6 bcfd in September and a record high of 103.1 bcfd in July.
On a daily basis, output rose to a record 106.1 bcfd on Sunday, topping the prior record of 105.1 bcfd on Saturday.
Even though the weather remains milder than normal, meteorologists noted it was still turning seasonally colder with the coming of winter.
With the coming of that seasonally colder weather, LSEG forecast U.S. gas demand, including exports, would jump from 97.0 bcfd this week to 104.6 bcfd next week. The forecast for next week was lower than LSEG's outlook on Friday.
Pipeline exports to Mexico slid to an average of 6.9 bcfd so far in October, down from a monthly record high of 7.2 bcfd in September.
Analysts, however, expect exports to Mexico to rise in coming months once New Fortress Energy's plant in Altamira starts pulling in U.S. gas to turn into liquefied natural gas (LNG) for export in November.
Gas flows to the seven big U.S. LNG export plants rose to 13.6 bcfd so far in October, up from 12.6 bcfd in September. That compares with a record high of 14.0 bcfd in April.
The U.S. is on track to become the world's biggest LNG supplier in 2023, ahead of recent leaders Australia and Qatar. Much higher global prices have fed demand for U.S. exports due in part to supply disruptions and sanctions linked to the war in Ukraine.
Gas was trading around $16 per mmBtu at both the Dutch Title Transfer Facility (TTF) benchmark in Europe and $18 at the Japan Korea Marker (JKM) in Asia.
(Reporting by Scott DiSavino; editing by Jonathan Oatis)