US natural gas futures fell about 3% to a fresh one-week low on Monday on record output, a drop in gas prices in Europe and forecasts for mild US weather through late October that will keep both heating and cooling demand low.
Front-month gas futures for November delivery on the New York Mercantile Exchange fell 8.9 cents, or 2.8%, to $3.147 per million British thermal units (mmBtu) by 8:59 a.m. EDT (1259 GMT), putting the contract on track for its lowest close since Oct. 4.
That also put the contract down for a fourth day in a row for the first time since early September.
In Europe, gas prices at the Title Transfer Facility (TTF) benchmark in the Netherlands dropped about 10% to $15 per mmBtu as high inventories and ample LNG flows ease supply concerns.
Even though the US front-month fell about 3% last week, speculators boosted their net long futures and options position on the New York Mercantile and Intercontinental Exchanges to the highest since May 2022, according to the US Commodity Futures Trading Commission’s Commitments of Traders report.
That jump in net longs, however, came as speculators cut their shorts by 77,345 to 145,669 contracts, the lowest since March 2021. That was the third biggest weekly cut in shorts on record and the most since speculators sold an all-time weekly high of 121,934 shorts in March 2020.
With mild weather in the US Northeast, spot power prices for Monday in New England fell to $19 per megawatt hour, their lowest since November 2020. That compares with an average of $40 so far in 2023, $91 in 2022 and a five-year (2018-2022) average of $51.
Supply and demand
LSEG said average gas output in the Lower 48 US states rose to an average of 103.4 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 hit a record 105.0 bcfd on Sunday.
With mild weather expected, LSEG forecast US gas demand, including exports, would hold around 97.3 bcfd this week and next. Those forecasts, however, were higher than LSEG’s outlook on Friday.
Pipeline exports to Mexico slid to an average of 7.0 bcfd so far in October, down from a monthly record high of 7.2 bcfd in September.
Analysts, however, said they expect exports to Mexico to rise in coming months once New Fortress Energy’s plant in Altamira starts pulling in US gas to turn into liquefied natural gas (LNG) for export.
Gas flows to the seven big US LNG export plants rose to 13.4 bcfd so far in October with the return of Berkshire Hathaway Energy’s Cove Point export plant in Maryland, up from 12.6 bcfd in September. That compares with a record high of 14.0 bcfd in April.