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U.S. natgas futures slide 3% on rising output, milder forecasts

U.S. natural gas futures slid about 3% on Friday as output slowly rises and on forecasts for milder weather and lower demand over the next two weeks than previously expected.

That decline comes despite a jump in the amount of gas flowing to U.S. liquefied natural gas (LNG) export plants over the past couple of days to a near seven-week high following the end of maintenance outages at some Gulf Coast plants.

U.S. front-month gas futures NGc1 for June delivery fell 22.5 cents, or 2.7%, to settle at $8.083 per million British thermal units (mmBtu).

Despite Friday’s decline, the contract was still up about 5% for the week after falling about 5% last week.

Gas was trading around $27 per mmBtu in Europe and $22 in Asia. The U.S. contract, meanwhile, rose to a 13-year high near $9 on May 6.

That was the lowest price for gas at the Title Transfer Facility (TTF) in the Netherlands since Feb. 22, before Russia invaded Ukraine on Feb. 24, and came a day before Russia plans to cut off gas supplies to Finland for failing to pay for the fuel in roubles.

U.S. futures lag far behind global prices because the United States is the world’s top producer, with all the gas it needs for domestic use while capacity constraints inhibit exports of more LNG.

Data provider Refinitiv said average gas output in the U.S. Lower 48 states climbed to 94.9 billion cubic feet per day (bcfd) so far in May from 94.5 bcfd in April. That compares with a monthly record of 96.1 bcfd in November 2021.

Refinitiv projected average U.S. gas demand, including exports, would hold near 89.7 bcfd this week and next before sliding to 88.7 bcfd in two weeks.

The average amount of gas flowing to U.S. LNG export plants rose to 12.3 bcfd so far in May from 12.2 bcfd in April. That compares with a monthly record of 12.9 bcfd in March. The United States can turn about 13.2 bcfd of gas into LNG.

On a daily basis, however, LNG feedgas was on track to hit a near seven-week high of 13.3 bcfd on Friday.

Since the United States will not be able to produce much more LNG soon, it has worked with allies to divert exports from elsewhere to Europe to help European Union (EU) countries and others break their dependence on Russian gas after Russia’s Feb. 24 invasion of Ukraine.

Russian gas exports to Europe rose to around 8.1 bcfd on Thursday from about 7.8 bcfd on Wednesday on the three mainlines into Germany: North Stream 1 (Russia-Germany), Yamal (Russia-Belarus-Poland-Germany) and the Russia-Ukraine-Slovakia-Czech Republic-Germany route. That compares with an average of 11.9 bcfd in May 2021.

Gas stockpiles in Northwest Europe – Belgium, France, Germany and the Netherlands – were about 14% below the five-year (2017-2021) average for this time of year, down from 39% below the five-year norm in mid-March, according to Refinitiv. Storage was currently about 37% of full capacity.

That is healthier than U.S. inventories, which were around 15% below their five-year norm, because high European gas prices have kept LNG imports strong while Russia keeps supplying fuel via pipeline.
Source: Reuters (Reporting by Scott DiSavino; Editing by Kirsten Donovan)

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