U.S. natural gas futures slid about 2% on Monday on record output and forecasts for milder weather and less heating demand next week than previously expected.
The amount of gas flowing through Columbia Gulf Transmission’s Corinth compressor in Mississippi returned to around 2.1 billion cubic feet per day (bcfd) on Sunday after a fire on Friday caused Columbia Gulf to curtail flows from Appalachia to the Gulf of Mexico to 1.8 bcfd on Friday and Saturday, according to data from Refinitiv.
Front-month gas futures fell 4.4 cents, or 1.8%, to $2.366 per million British thermal units (mmBtu) at 9:47 a.m. EDT (1347 GMT). On Friday, the contract rose about 2% to its highest close since March 16.
Last week, speculators turned their net long futures and options positions, which only lasted one week, back into net short positions on the New York Mercantile and Intercontinental Exchanges, according to the U.S. Commodity Futures Trading Commission’s Commitments of Traders report.
Speculators positions were net short from June 2022 until the week of April 18.
Looking ahead, the premium on March 2024 futures over April 2024 NGH24-J24, which the industry calls the widow maker, slid to 26 cents per mmBtu, its lowest since July 2020, while the premium of the November 2023 contract over October 2023 NGV23-X23
rose to a record 46 cents.
The industry calls the March-April spread the “widow maker” because rapid price moves resulting from changing weather forecasts have forced some speculators out of business, including the Amaranth hedge fund, which lost more than $6 billion in 2006.
The industry uses the March-April and October-November spreads to bet on winter weather forecasts since March is the last month of the winter heating season when utilities pull gas out of storage and October is the last month of the summer cooling
season when utilities inject gas into storage.
In the spot market, meanwhile, mild weather and low demand pressured next-day gas prices for Monday at the Southern California Border NG-SCL-CGT-SNL to $3.14 per mmBtu, their lowest since June 2021.
SUPPLY AND DEMAND
Data provider Refinitiv said average gas output in the U.S. Lower 48 states rose to a record 101.3 bcfd in April, up from the prior all-time high of 100.5 bcfd in March.
Meteorologists projected the weather in the Lower 48 states would turns from colder-than-normal from May 1-5 to near- to warmer-than-normal from May 6-16.
With the weather turning seasonally warmer, Refinitiv forecast U.S. gas demand, including exports, would slide from 95.6 bcfd this week to 91.0 bcfd next week. The forecast for next week was lower than Refinitiv’s outlook on Friday.
Gas flows to the seven big U.S. LNG export plants rose to a record 14.0 billion cubic feet per day (bcfd) in April, up from the previous all-time high of 13.2 bcfd in March, according to Refinitiv.
That is higher than the 13.8 bcfd of gas the seven plants can turn into LNG since the facilities use some of the fuel to power equipment used to produce LNG.
Some analysts have begun to question whether the recent collapse of gas prices in Europe and Asia could force U.S. exporters to cancel LNG cargoes this summer after mostly mild weather over the winter left massive amounts of gas in storage. In 2020, at least 175 LNG shipments were canceled due to oversupply and weak demand.
But for now, most analysts say energy security concerns following Russia’s invasion of Ukraine in February 2022 should keep global gas prices high enough to sustain record U.S. LNG exports in 2023.
Gas was trading at a 21-month low of around $12 per mmBtu at the Dutch Title Transfer Facility (TTF) benchmark in Europe and at a 22-month low of $12 at the Japan Korea Marker (JKM) in Asia.