US natural gas futures edge up on decline in output

US natural gas futures edged up for a third day in a row on Wednesday due to a slight decline in output, despite weather forecasts confirming the previous warmer-than-normal forecast for the next two weeks.

After rising about 7% earlier this week, front-month gas futures for April delivery on the New York Mercantile Exchange rose 2.7 cents, or 1.5%, to settle at $1.827 per million British thermal units (mmBtu).

That is the first time the front-month increased for three days in a row since early January.

Despite this week’s gains, gas prices were still down 37% since hitting an eight-month high of $2.905 per mmBtu in early November because record production and mild winter weather enabled utilities to leave more gas in storage, making fuel shortages and price spikes unlikely.

In Texas, next-day gas prices at the Waha hub in the Permian basin remained in negative territory for a second day in a row for the first time since August as pipeline constraints returned to the region and mild weather cut heating demand.

Gas output in the US Lower 48 states eased to 93.5 billion cubic feet per day (bcfd) on Tuesday from 94.0 bcfd on Monday, according to Refinitiv. That compares with an average of 94.1 bcfd last week and a daily record high of 96.6 bcfd on November 30.

With the coming of spring-like weather, Refinitiv, a data provider, projected average demand in the Lower 48 states, including exports, would ease from 109.2 bcfd this week to 105.0 bcfd next week. That is similar to Refinitiv’s forecast on Tuesday.

The amount of gas flowing to US LNG export plants, meanwhile, fell to a seven-week low of 7.0 bcfd on Tuesday due mostly to a decline at Cheniere Energy Inc’s Sabine Pass in Louisiana, down from 7.9 bcfd on Monday, according to Refinitiv.

Officials at Cheniere said they do not comment on operations. Some traders said fog near Sabine Pass was slowing tanker traffic. The last LNG tanker to enter the plant was on March 1.

Traders are watching gas flows to US LNG export plants for declines after customers canceled a couple of cargoes for April as low prices in Europe and Asia – because of record-high storage in Europe and lower demand in China due to the coronavirus – made it uneconomical for some European customers to lift cargoes.

With demand from US power generators and industrial firms expected to decline or steady in coming years, producers are counting on LNG exports to maintain their spectacular growth in coming years to absorb record amounts of gas associated with oil production from shale formations.

US LNG exports jumped 53% in 2018 and 68% in 2019, and are expected to rise 33% in 2020, according to federal energy projections.

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