US natural gas prices edge up 1% ahead of Gulf of Mexico hurricane

U.S. natural gas futures edged up about 1% on Tuesday on worries that another hurricane in the Gulf of Mexico could disrupt output this week.

Front-month gas futures NGc1 for December delivery on the New York Mercantile Exchange were up 2.4 cents, or 0.9%, to $2.805 per million British thermal units at 8:07 a.m. EST (1307 GMT).

That small price increase occurred despite forecasts for milder weather and lower heating demand over the next two weeks than previously expected.

The U.S. National Hurricane Center forecast Tropical Storm Rafael would strengthen into a hurricane on Wednesday as it moves northwest from the Caribbean Sea toward Cuba and the Gulf of Mexico, and then to weaken back into a tropical storm before possibly hitting the U.S. Gulf Coast around Louisiana over the weekend.

Hurricanes can boost gas prices by cutting output, although only about 2% of the nation’s gas comes from the federal offshore Gulf of Mexico area. But hurricanes can also reduce prices by destroying demand for gas through power outages and knocking liquefied natural gas (LNG) export plants out of service. Some storms do both.

In the spot market, pipeline constraints caused next-day gas prices at the Waha hub NG-WAH-WTX-SNL in the Permian Shale in West Texas to remain in negative territory for a record 44th time this year.

Even though prices were now negative for four days in a row, analysts have said they expect prices to mostly remain in positive territory now that the new Matterhorn gas pipe from the Permian to the Houston area is in service.

Waha prices first averaged below zero in 2019. It happened 17 times in 2019, six times in 2020 and once in 2023.

SUPPLY AND DEMAND

Financial firm LSEG said average gas output in the Lower 48 U.S. states has slid to 100.9 billion cubic feet per day (bcfd) so far in November, down from 101.3 bcfd in October. That compared with a record 105.3 bcfd in December 2023.

On a daily basis, output was on track to drop by about 2.4 bcfd over the past three days to a preliminary 26-week low of 99.2 bcfd on Tuesday. Analysts have noted that preliminary data is often revised later in the day.

Meteorologists projected the weather in the Lower 48 states would remain warmer than normal through at least Nov. 20. But even warmer-than-normal weather in late November is colder than warmer-than-normal weather in early November.

With seasonally cooler weather coming, LSEG forecast average gas demand in the Lower 48, including exports, would rise from 100.9 bcfd this week to 101.4 bcfd next week. Those forecasts were lower than LSEG’s outlook on Monday.

The amount of gas flowing to the seven big U.S. LNG export plants has fallen to an average of 12.2 bcfd so far in November, down from 13.1 bcfd in October. That compares with a monthly record high of 14.7 bcfd in December 2023.

The feedgas decline so far this month is mostly due to the shutdown of Freeport LNG’s 2.1-bcfd plant in Texas on Nov. 1 due to a power feed interruption at the pre-treatment facility, according to a company report to Texas environmental regulators.

Gas flows to Freeport were on track to rise to a preliminary record high of 2.5 bcfd on Tuesday, according to LSEG data. That compares with an average of 1.9 bcfd during the week prior to the Nov. 1 shutdown. Freeport’s current all-time daily high is 2.3 bcfd on April 26, 2023.
Source: Reuters (Reporting by Scott DiSavino; Editing by Paul Simao)